LIBRARY 


UNIVERSITY  OF  CALIFORNIA, 


Class 


61ST  CONGRESS  )  OTPTVTATI?  /DOCUMENT 

2d  Session       /  SENATE  j     No.  573 


NATIONAL  MONETARY  COMMISSION 


The  History  and  Methods  of 
the  Paris  Bourse 


BY 

E.  VIDAL 


Washington  :  Government  Printing  Office  :  1910 


NATIONAL  MONETARY  COMMISSION. 


NELSON  W.  ALDRICH,  Rhode  Island,  Chairman. 

EDWARD  B.  VREELAND,  New  York,  Vice -Chair  man. 

JULIUS  C.  BURROWS,  Michigan.  JOHN  W.  WEEKS,  Massachusetts. 

EUGENE  HALE,  Maine.  ROBERT  W.  BONYNGE,  Colorado. 

PHILANDER  C.  KNOX,  Pennsylvania.  SYLVESTER  C.  SMITH,  California. 

THEODORE  E.  BURTON,  Ohio.  LEMUEL  P.  PADGETT,  Tennessee. 

HENRY  M.  TELLER,  Colorado.  GEORGE  F.  BURGESS,  Texas. 

HERNANDO  D.  MONEY,  Mississippi.  ARSENE  P.  Pujo,  Louisiana. 

JOSEPH  W.  BAILEY,  Texas.  ARTHUR  B.  SHELTON,  Secretary, 

A.  PIATT  ANDREW,  Special  Assistant  to  Commission. 


TABLE  OF  CONTENTS. 


BOOK  I. 

Page. 

GENERALITIES _ -  3 

BOOK  II. 

THE  BOURSE. — THE  TRADERS. — THE  OPERATIONS ._  21 

First      Division:       Bourses. — Merchandise      brokers. — Stock- 
brokers.— Curb  brokers. — Securities 23 

Second  Division:  The  operations  for  cash 33 

Third  Division:  Operations  for  future  delivery 45 

Fourth  Division:    On  Exchange. — Concerning  the  negotiation 

of  bills  of  exchange  and  precious  metals 76 

Fifth  Division:  Bourses  in  the  Departments 85 

BOOK  HI. 

JUDICIAL  CONSIDERATIONS  ON  THE  MONOPOLY  OF  STOCKBROKERS.  89 

BOOK  IV. 

HISTORICAL  AND  ECONOMIC  CONSIDER ATIONS in 

First  Division:  The  exchange  market. — Origin  of  public  credit.  114 

Second  Division 124 

Third  Division:  The  Council's  decisions  of  1724  to  1788. — The 

financial  market  on  the  eve  of  the  revolution 142 

Fourth  Division:  The  financial  market  during  the  revolution —  148 

Fifth  Division:  The  nineteenth  century 162 


212709 


Of    THE 

(  UNIVERSITY    | 

ILIF< 


THE  HISTORY  AND  METHODS  OF 
THE  PARIS  BOURSE. 

By  E.  VIDAL. 

BOOK  I. — Generalities. 

Page. 

1.  Transferable  securities  are  products  of  industry,  subject  to  the 

general  conditions  of  the  production  and  exchange  of  wealth.       3-5 

2.  What  is  meant  by  a  financial  market? 5 

3.  Difference  between  fairs,  markets,  and  the  Bourse.     Merchandise 

brokers  and  stockbrokers  (courtiers  et  agents  de  change) 5-6 

4.  The   Bourse   is   a   public   place,  a  public  mart.     Commerce  in 

France  is  free,  but  in  the  right  belonging  to  the  authorities  to 
keep  order  in  a  public  place  originated  the  right  to  regulate 
the  Bourse.  Under  the  old  regime,  the  selling  of  the  right  to 
work  was  mainly  the  cause  of  the  establishment  of  merchan- 
dise brokers  and  stockbrokers 6-9 

5.  The  revolutionary  period.     The  freedom  of  the  market.     Stock- 

jobbing (agiotage}  and  its  causes 9-16 

6.  Laws  now  governing  the  French  financial  market 16-17 

7.  Brief    considerations    on    the    "reorganization"  of   the  French 

market,  effected  in  1898 17-18 

8.  The  grounds  for    the    present  organization    have   disappeared, 

but  the  organization  remains 1 8-20 

(i)  The  author  of  the  present  work  deems  it  necessary, 
first  of  all,  to  connect  the  study  of  a  financial  market  with 
that  of  the  totality  of  elements  belonging  to  the  field  of 
political  economy. 

Are  the  emission  of  fiduciary  values  and  the  trading 
therein  special  phenomena?  Or  are  they,  on  the  con- 
trary, subject  to  the  general  conditions  of  the  production 
and  exchange  of  wealth? 

Beyond  a  doubt,  fiduciary  values,  more  generally  known 
in  France  as  ualeurs  mobilieres,  i.  e.,  transferable  secu- 


National     Monetary     Commission 

ities,a  are  wealth  created  by  man's  industry,  and  circu- 
lating by  virtue  of  the  general  causes  which  create  and 
dominate  commerce. 

The  producer  extracts  the  raw  material  or  transforms 
it,  in  order  to  render  it  suitable  to  the  requirements  of  the 
consumers;  the  tradesman  conveys  the  manufactured 
product,  or,  as  merchant,  as  commission  agent,  as  broker, 
or  even  as  money  lender,  causes  it  to  circulate.  In  the 
same  way  there  are  producers,  traders,  and  consumers  of 
transferable  securities. 

The  producers  of  transferable  securities  are  the  financiers, 
who  negotiate  with  borrowing  governments  or  with  repre- 
sentatives of  provinces  or  cities  desirous  of  borrowing. 
They  decide  upon  the  rates  of  interest,  the  conditions  of 
sinking  funds,  and  the  maturity  of  the  coupons.  They 
prepare  and  arrange  the  emissions;  they  do  the  same  for 
borrowing  stock  companies.  Often,  they  even  create 
these  stock  companies;  they  lay  down  their  by-laws,  and 
they  secure  for  them  the  executive  and  professional  staffs. 
They  have  as  auxiliaries  the  guaranty  syndicates  and  the 
bankers — genuine  dealers  in  transferable  securities,  who 
buy  and  sell  for  their  own  account.  Dealers  are  likewise 
those  auxiliaries  of  commerce  who  are  represented  by  the 

a  Article  516  of  the  Code  civil:  "All  wealth  (biens}  is  either  transfer- 
able or  intransferable." 

ART.  529.  Transferable  are,  by  the  determination  of  the  law,  bonds  and 
shares  which  represent  monetary  claims  or  movable  effects;  the  shares  or 
interests  in  financial,  commercial,  or  industrial  companies,  even  when  the 
real  estate  used  in  these  undertakings  belongs  to  the  companies.  These 
shares  or  interests  are  deemed  transferable  with  regard  only  to  each  partner, 
as  long  as  the  company  exists.  Perpetual  or  life  annuities  paid  by  the 
state  or  by  individuals  are  also  deemed  transferable  wealth  according  to  law. 


History   and   Methods   of  the   Paris   Bourse 

brokers  and  commission  merchants  in  securities,  and  who 
trade  for  account  of  third  parties  in  the  public  marts. 

The  capitalists,  and  even  the  speculators,  are  the  con- 
sumers of  transferable  securities.  Thus  we  see  producers, 
dealers,  and  consumers  in  the  domain  of  transferable 
securities,  just  as  may  be  seen  producers,  dealers,  and 
consumers  in  any  other  field  of  commodities. 

(2)  By  a  financial  market,  in  the  widest  sense  of  the 
word,  is  meant  the  totality  of  elements,  either  universal 
or  regional,  which  cooperate  in  the  issuing  and  circulating 
of  transferable  securities. 

In  a  limited  sense,  we  understand  by  a  financial  market 
the  public  place  in  a  city  where  dealings  in  securities  are 
carried  on — the  public  place  specially  set  apart  for  these 
dealings.  That  public  place  is  the  Bourse. 

Thus,  the  Bourse  is  a  public  place.  This  fact  should  be 
constantly  borne  in  mind.  Only  thus  is  it  possible  thor- 
oughly to  understand  not  only  its  history  but  also,  in  cer- 
tain cases,  aggregate  of  regulations  and  laws  which  control 
its  workings. 

(3)  Bourses  differ  from  fairs  and  markets  in  that,  ac- 
cording to  the  accepted  usage  on  the  bourses,  articles  need 
not  be  exhibited  to  the  buyer  at  the  time  the  contract  is 
made,  whereas  the  customary  procedure  at  fairs  and  mar- 
kets is  different.0 

The  bourses  themselves  are  divided  into  commercial 
exchanges  proper  (bourses  de  commerce),  where  merchan- 
dise is  dealt  in — such  as  wheat,  flour,  spirits,  sugar,  etc. — 

"Thaller,  Droit  Commercial,  26.  ed.  No.  824. — Lyon-Caen  et  Renault, 
Traite  de  Droit  Commercial,  T  I,  Nos.  20  and  328. 


National    Monetary     Commission 

and  stock  exchanges  (bourses  des  valeurs) ,  where  securities 
are  dealt  in. 

On  the  commercial  exchanges  the  brokers  formerly 
traded  in  merchandise,  coins,  bills  of  exchange,  and  deeds, 
which  are  in  some  way  the  predecessors  of  modern  securi- 
ties. The  commission  agents  operating  on  the  bourses 
were  called  brokers  in  exchange,  provisions,  and  merchan- 
dise (les  courretiers  de  change,  denrees  et  marchandises) . 
Thus,  a  decree  of  Charles  IX,  of  June,  1572,  is  called,  "A 
decree  concerning  brokers  in  exchange  and  provisions,  as 
well  as  cloths,  silk,  woolens,  linens,  leather,  and  other 
kinds  of  merchandise,  wines,  wheat  and  other  grains, 
horses  and  all  other  kinds  of  cattle."  °  It  is  only  since  the 
year  1639  that  the  functions  of  stockbrokers  and  merchan- 
dise brokers  seem  to  have  been  separated.6  Indeed,  a 
decree  of  the  King's  council  of  April  2,  1639,  gives  to  the 
brokers  in  exchange  the  name  of  agents  de  change  (stock- 
brokers).6 

As  we  stated,  it  is  the  fact  that  the  Bourse  is  a  public 
place  which  has  determined  its  regulation.  It  is  now 
important  to  enlarge  upon  this  statement. 

(4)  In  France  commerce  is  unfettered,  and  yet  the 
administration  of  stock  exchanges  is  so  overridden  with 
regulations  as  to  constitute,  in  that  regard,  an  exception, 
a  considerable  derogation  from  common  law. 

Article  7  of  the  law  of  March  17,  1791,  says:  "Every 
one  shall  be  free  to  carry  on  such  business,  or  to  practise 
such  profession,  as  he  may  see  fit,  subject,  however,  to 
such  police  regulations  as  have  been  or  may  be  made." 

a  Manuel  des  Agents  de  Change,  p.  7. 

&  Lyons-Caen  &  Renault,  Traite  de  Droit  Commercial,  T.  IV,  No.  872. 

c  Manuel  des  agents  de  change,  p.  15. 


History   and   Methods   of  the   Paris    Bourse 

On  September  17,  1807,  Regnaud  de  St.  Jean  d'Angely, 
when  he  tendered  the  draft  of  commercial  law  establish- 
ing a  Code,  expressed  himself  as  follows: 

"At  the  beginning  of  Book  I  and  under  the  title  of 
'General  Provisions,'  the  drafters  had  laid  down  rules, 
some  of  which  are  purely  theoretical  and  superfluous. 
Some  others  have  been  found  more  fit  to  belong  elsewhere. 
Thus,  for  instance,  we  have  not  thought  it  necessary  to  state 
that  in  France  everyone  had  the  right  to  trade  *  *  *  ."° 

Thus  no  one  disputes  that  the  principle  of  freedom  of 
trade  remains  to-day  one  of  the  rights  of  man  (except  in 
the  politico-economical  school  which  causes  personal  rights 
to  be  swallowed  up  by  common  rights).  The  principle 
of  freedom  of  trade  is  a  positive  right,  and  is,  in  some  way, 
confirmed  by  our  constitutional  laws.  Indeed,  one  may 
read  in  the  preliminary  draft  of  the  constitutional  laws  of 
1875  the  following  sentence,  characteristic  of  M.  Lepere's 
style:  "We  have  enacted  a  series  of  constitutional  pro- 
visions, without  endeavoring  to  promulgate  principles  any 
more  than  to  formulate  philosophical  statements.  Our 
principles  are  known.  They  are  the  principles  of  176*9, 
which  all  succeeding  governments  have  recognized. ' ' b 

However,  notwithstanding  the  principle  of  freedom  of 
trade,  the  French  financial  market  is  not  free.  The  pro- 
fession of  stockbroker  (agent  de  change)  is,  as  will  be  seen, 
a  monopoly.  It  is  not  a  State  monopoly,  like  that  of 
the  sale  of  tobacco,  gunpowder,  matches,  or  of  carrying 

a  Expos6  des  Motifs  du  Code  de  Commerce.  Corps  Legislatif.  i°Sep- 
tembre,  1807,  Archives  Parlementaires,  1807. 

&  Session  of  February  17,  1875.  Annales  de  I'Assemblee  Nationale,  T. 
XXXVI,  p.  619.  The  principle  of  freedom  of  trade,  started  in  1791, 
belongs  to  the  principle  of  freedom  to  work  proclaimed  in  1789.  (Ducrocq) 
Droit  Administratif,  T.  Ill,  p.  574. 

7 


National     Monetary     Commission 

the  mails ;  it  is  a  monopoly  held  by  certain  persons  for 
their  own  benefit.  It  is  a  question  of  a  private  monopoly 
intrusted  to  individuals. 

What  is  the  origin  of  this  phenomenon?  Why  this  ex- 
ception? We  have  found  this  question  quite  brilliantly 
elucidated  in  the  pleadings  of  an  eminent  barrister,  Dean 
du  Buit,  during  a  famous  financial  lawsuit.0 

"The  Bourse,"  said  he,  "is  a  public  mart  where  bills 
and  securities  are  purchased,  just  as  fairs  are  public  marts 
where  grain  and  cattle  and  all  kinds  of  merchandise  are 
purchased.  These  public  marts,  these  bourses,  are  always 
spontaneously  and  gradually  formed,  by  one  and  the  same 
process — either  in  answer  to  requirements,  or  through 
habits,  or  by  the  cooperation  of  populations. 

"There  is,  for  instance,  in  a  given  place,  a  center  for 
gatherings,  and,  by  and  by,  as  it  becomes  known  that 
purchasers  will  be  found  there,  everyone  brings  to  this 
center  what  he  has  to  sell.  Customs  and  regulations  are 
also  spontaneously  here  established.  The  way  to  buy,  or 
to  sell,  is  learned;  and  thus  is  formed  what  commercial 
laws  designate  as  local  usage  (V usage  de  la  place) . 

"Finally,  the  market  is  established;  it  develops,  and, 
as  is  necessarily  the  case  with  all  that  is  human,  abuses 
gradually  make  their  appearance.  These  abuses  become 
glaring;  stockjobbing  sets  in;  quarrels,  brawls,  and  dis- 
orders take  place;  and  the  central  power  investigates. 

"The  authorities  interfere  and  take  the  market  in  hand. 
There  are  abuses,  they  say;  we  are  going  to  correct  them; 

°  In  the  matter  of  the  People  and  the  Association  of  Stockbrokers  v. 
Messrs,  de  Buzelet  &  Perriere.  Tribunal  de  la  Seine  22  Femier  1907. 
Compte  rendu  de  la  Cote  de  la  Bourse  et  de  la  Banque  du  24  Fewier,  1907. 


History   and   Methods   of  the   Paris    Bourse 

there  are  fraudulent  middlemen — we  shall  replace  them 
by  middlemen  whom  we  ourselves  shall  appoint.  We  shall 
make  regulations;  they  will  be  carried  out  in  the  market; 
and  thus  we  shall  fix  as  a  regulation  that  when  a  party 
desires  to  enter  the  market  to  dispose  of  securities,  instead 
of  trusting  himself  to  one  of  these  intermeddlesome  mid- 
dlemen, who  bring  business  into  disrepute,  he  will  ad- 
dress himself  to  the  middlemen  whom  we  shall  appoint. 
Through  them  alone  he  will  be  bound  to  trade." 

Thus  spoke  Maitre  du  Buit;  and  it  can  not  be  denied 
that  it  is  from  the  police  authority  that  the  power  of  regu- 
lating the  Bourse  as  a  public  place  originates.  But  the 
authorities  have  found  some  advantage  in  the  exercise  of 
that  power  of  regulation.  Under  the  old  regime  the  Gov- 
ernment considered  itself  as  the  master  of  persons,  as  the 
owner  of  their  right  to  work.  Accordingly,  it  sold  it  to 
them.  It  often  occurred  that  it  bestowed  monopoly  and 
privilege  on  certain  people  who  bought  their  benefits.  The 
traffic  in  charges,  employments,  offices,  which  was  the 
plague  of  the  old  regime,  was  practised  also  on  the  pro- 
fessions of  merchandise  broker  and  of  stockbroker. 

The  monopoly  of  agents  de  change,  in  reality,  was  pur- 
chased from  the  Government  under  the  old  regime. 

(5)  The  revolution  takes  place. 

The  law  of  March  17,  1791,  which  suppressed  offices, 
charters,  and  wardenships  of  trade  companies,  also  abol- 
ished the  monopoly  of  the  agents  de  change,  which  had 
been  established  by  a  series  of  successive  royal  decrees 
from  1724  to  1788 — decrees  by  which  the  privileges  of 
monopoly  had  been  by  turns  bestowed,  modified,  with- 
drawn, restored,  or  confirmed. 


National    M on  et ar y     Commission 

But  the  disturbances  at  home  and  abroad  at  the  time  of 
the  French  Revolution,  and  the  financial  policy  which,  in 
the  domain  of  private  property,  manifested  itself  in  the 
suppression  of  stock  companies,0  and,  in  the  domain  of 
public  credit,  assumed  the  form  of  the  emission  of  assig- 
nats,  forced  loans,  and  bankruptcy — all  this  caused  a 
terrible  repercussion  on  the  financial  markets. 

When  the  Bourse  was  closed  for  the  first  time  (from 
June  27,  1793,  to  April  25,  1795)  and  stock  companies 
were  suppressed,  rentes  disappeared  from  the  market.6 
It  was  not  rentes  and  shares  of  stock  companies  that 
attracted  speculation,  and  for  very  good  reasons.  In- 
stead, people  dabbled  in  metals  and  in  bills  of  exchange, 
owing  to  two  causes :  The  decline  in  the  value  of  assignats, 
and  the  scarcity  of  metallic  currency. 

It  could  not  be  otherwise.  The  phenomenon  was 
inevitable,  and  so  it  actually  took  place.  Let  us  ex- 
plain it. 

If  you  piace  in  a  safe  1,000  francs  in  napoleons,  >  and 
if  you  cause  these  50  pieces  of  20  francs  each  to  be  repre- 
sented by  i  ,000  sheets  of  paper,  these  i  ,000  sheets  of  paper 
will  theoretically,  and  yet  quite  accurately,  be  worth  i 
franc  each.  If,  instead  of  1,000  sheets,  2,000  sheets  are 
issued,  the  value  will  normally  have  to  fall  to  50  centimes. 
If  4,000  are  issued,  the  value  will  fall  to  25  centimes,  and 
so  on.  It  may  happen  that  the  party  who  emits  them 
(especially  if  it  be  the  Government)  should  become  indig- 
nant because  of  the  decline,  and,  in  its  ignorance,  assign 
the  reasons  for  the  decline  to  stockjobbing.  But,  whatever 

a  Decree  of  August  24,  1793. 

b  Because  interest  was  paid  in  paper  which  was  gradually  shrinking  in 
value. 

10 


History   and    Methods   of  the    Paris  Bourse 

it  may  do,  the  paper  will  always  tend  to  be  worth 
exactly  that  which  it  represents.  If  the  Government 
threatens  those  it  holds  responsible  for  the  decline  with 
the  worst  punishments — the  carcan,  the  pillory,  death 
even — it  will  be  all  in  vain;  the  paper  money  will  tend 
to  be  worth  only  that  which  it  represents.  Perhaps 
the  paper  may  fall  even  below  its  intrinsic  value,  owing 
to  the  endeavors  of  the  issuing  party  to  boost  it;  but 
it  will  not  really  be  the  merchants  who  have  caused  the 
paper  to  fall,  nor  even  those  in  whose  hands  the  paper  is 
found.  The  author  of  the  phenomenon  is  the  very  party 
issuing  the  paper. 

The  scarcity  of  metal  currency  is  a  corollary  to  the 
decline  of  the  paper.  When  paper  declines,  those  who 
have  gold  do  not  care  to  exchange  it  for  paper  steadily 
depreciating  in  their  hands.  In  consequence,  they  de- 
mand for  a  little  gold  a  great  deal  of  paper.  Paper 
declines,  gold  rises. 

Finally,  when  a  country  is  in  the  throes  of  a  revolution, 
home  production  of  produce  and  of  the  most  ordinary 
objects  of  utility  diminishes  for  the  very  reason  of  the 
existing  troubles.  What  is  wanting,  must  be  drawn  from 
abroad;  but  how  should  payment  be  made  for  it?  In 
gold,  in  coin  used  abroad — that  is  to  say,  in  foreign  bills 
of  exchange.  This  is  a  new  reason  for  the  rise  in  gold  and 
for  a  rise  in  the  rates  of  foreign  exchange  which  represents 
gold.  These  grounds  for  a  rise  will  be  still  greater  when 
the  country  is  at  war  with  one  or  several  foreign  nations. 

Such  is,  in  some  way,  the  physiology  of  the  double 
economic  movement — the  decline  of  paper,  and  the  rise 
of  metal.  The  speculations  of  the  revolutionary  times  did 


National    Monetary     Commission 

not  cause  the  decline  of  paper, nor  the  rise  of  metal;  they 
merely  gave  expression  to  the  double  phenomenon. 

On  this  occasion  the  complete  history  of  the  French 
Revolution  can  not  be  given;  the  domestic  strife,  the  riots, 
the  famines,  the  wars  of  the  Republic  at  its  birth,  need  not 
again  be  narrated.  But  what  is  very  well  known  is  that, 
after  a  first  issue  of  assignats  for  400,000,000  French 
livres,  in  pursuance  of  the  decree  of  December  19,  1790, 
other  issues  followed  and  successively  brought  up  to 
45,000,000,000  livres  the  amount  of  assignats  issued.  And 
the  first  form  of  the  double  phenomenon  made  its  appear- 
ance— the  decline  of  paper. 

The  rise  in  metallic  currency  followed,  aggravated  by 
the  state  of  war  between  France  and  nearly  the  whole  of 
Europe  combined.  Famines  occurred,  and  the  Convention 
authorized  the  supreme  executive  councils  in  the  Depart- 
ments to  fix  the  maximum  prices.  Thereupon  the  mer- 
chants ceased  to  sell,  and  the  manufacturers  to  produce,  as 
the  maximum  had  taken  no  account  of  the  cost  price. 
Stockjobbing  assumed  fabulous  proportions.  In  order  to 
procure  food,  people  disposed  of  their  belongings.  The 
possessor  of  gold  and  silver  or  of  bills  of  exchange  dictated 
the  prices.  ° 

The  convention  took  alarm  at  the  rise  of  the  metallic 
currency  that  accompanied  the  decline  of  the  assignats — a 
rise  still  more  aggravating  the  situation  at  home  and  the 

aRambaud.  Histoire  de  la  Civilisation  Contemporaine  en  France,  p.  291. 
See  also  in  the  Magistral  of  M.  Emile  Levasseur,  L' 'Histoire  des  classes 
ouvrieres  depuis  1789  a  1870  (T.  I,  Ch.  Les  Assignats),  the  verification  of 
the  repercussions  caused  by  the  decline  of  assignats.  In  1795  a  bushel  of 
potatoes  was  worth  200  livres  in  assignats;  i  pound  of  butter,  560  livres; 
a  new  coat,  15,000  livres;  and  a  "clean"  hat,  500  livres  (p.  224). 


12 


History   and   Methods   of  the   Paris   Bourse 

wars  abroad.  The  convention  attributed  the  rise  of  the 
metal  to  stockjobbing,  which,  it  should  be  borne  in  mind, 
had  thrown  off  all  restraint.  Thus,  two  laws  were  pro- 
mulgated— the  law  of  1 8  Fructidor,  year  III  (April  30, 
1795),  forbidding  the  selling  of  gold  and  silver  anywhere 
save  on  the  Bourse,  and  that  of  28  Vendemiaire,  year  IV 
(October  20,  1 795) ,  on  the  regulations  of  the  Bourse. 

The  law  of  18  Fructidor,  year  III,  provided  the  follow- 
ing in  article  i : 

"  ARTICLE  i .  It  is  forbidden  to  anyone  in  Paris  or  in  all 
commercial  cities  where  there  is  a  bourse,  to  sell  gold  or 
silver,  either  coined,  or  in  bars  or  ingots,  or  manufactured; 
or  to  make  trades  having  these  metals  for  basis,  in  public 
places  or  premises  other  than  the  Bourse.  All  offenders 
shall  be  sentenced  to  two  years'  imprisonment,  to  be  ex- 
posed to  public  view,  with  a  sign  board  on  the  chest  bear- 
ing the  word  'agioteur '  (stockjobber) ,  and  by  the  same 
process  all  his  property  shall  be  confiscated  for  the  bene- 
fit of  the  Republic." 

As  to  the  law  of  28  Vendemiaire,  year  IV,  on  bourse 
regulation,  it  contained  the  following  provisions: 

"  ART.  6.  The  committees  of  public  safety  and  of  finance 
shall  appoint,  within  twenty-four  hours,  25  stockbrokers; 
20  of  them  shall  be  assigned  to  banking  operations  and 
negotiations  in  foreign  bills  in  Paris ;  the  remaining  5  shall 
be  assigned  to  the  purchase  and  sale  of  coined  metal,  and 
gold  and  silver  bullion ;  all  of  them  shall  be  called  '  agents 
de  change'  (stockbrokers). 

"ART.  7.  They  shall  be  invested  with  a  commission, 
which  shall  be  delivered  to  them  at  once  by  the  committees 


National    Monetary     Commission 

of  public  safety  and  of  finance,  for  the  exclusive  exercise 
of  the  functions  which  are  conferred  upon  them." 

Thus  the  law  of  28  Vendemiaire,  year  IV,  reestablished 
the  stockbrokers,  suppressed  in  1791,  as  merchants  vested 
with  a  monopoly.  The  law  reestablishes  their  power  only 
with  regard  to  dealing  in  bullion  and  foreign  bills. 

Concerning  bullion,  article  13  of  Chapter  I  stated: 

"No  statement  concerning  the  sale  or  purchase  of  bul- 
lion shall  be  admitted  in  court  except  when  made  by  the 
5  appointed  stockbrokers  (Aucune  declaration  .  .  . 
ne  sera  recu  en  justice  que  celle  des  cinq  agents  choisis 
.  .  .),  and  no  bargain  shall  be  considered  valid  unless 
transacted  through  their  agency." 

Concerning  the  negotiating  of  bills  of  exchange,  article  8 
of  Chapter  II  stated: 

"No  statement  concerning  the  negotiation  of  bills  of 
exchange,  notes,  or  other  commercial  instruments  shall  be 
admitted  in  court  except  when  made  by  the  20  appointed 
brokers,  and  no  bargain  shall  be  considered  valid,  unless 
transacted  through  their  agency." 

It  is,  therefore,  quite  evident  that  the  lawmaker  of 
Venddmiaire,  year  IV,  was  not  guided  by  any  respect  for  the 
principle  of  freedom  of  trade;  that  there  existed  at  that 
time  no  principle  but  that  of  public  safety.  The  life,  the 
liberty,  and  the  property  of  citizens,  were  of  little  moment. 
When  the  law  of  28  Vendemiaire,  year  IV,  was  promulgated, 
the  amount  of  assignats  outstanding  was  1 7,879, 337>898 
French  livres,  and  the  total  number  issued  during  the  last 
three  months  was  for  the  amount  of  5,541,194,037  livres. a 

a  J.  M.  Fachan,  Historique  de  la  Rente  Franqaise  et  des  valeurs  du  Tresor, 
p.  107. 


History   and   Methods   of  the   Paris   Bourse 

The  assignat  of  i  livre  had  declined  during  these  three 
months  from  0.304  to  0.136.°  A  forced  loan  without 
interest  had  been  levied  on  "the  rich,  the  selfish,  and  the 
indifferent."6  Terrible  famines  had  afflicted  the  country 
and  provoked  bloody  insurrections  (12  Germinal,  year  III, 
i  Prairial,  year  III,  13  Vendemiaire,  year  IV).  England 
had  determined  to  fight  France  in  every  way;  she  did  not 
limit  herself  to  merely  organizing  the  Quiberon  expedition. 
The  Marquis  de  Puysage  had  convinced  Pitt  of  the  advan- 
tages to  be  derived  from  flooding  French  territory  with  coun- 
terfeit assignats  which  the  best  engravers  of  Holland  were 
to  manufacture  with  such  consummate  skill  that  "  Cambon 
himself  would  have  accepted  them."c  A  first  issue  of 
these  counterfeit  assignats  had  taken  place,  and  from 
Berne  3,000,000,000  livres  of  these  had  been  let  loose. c 
Meanwhile,  on  the  13  Fructidor,  year  III,  a  law  which  we 
have  already  mentioned  forbade  the  sale  of  gold  and  silver 
elsewhere  than  on  the  Bourse,  and  almost  immediately 
after  that,  on  the  28  Vendemiaire,  year  IV,  another  law  on 
bourse  regulation  declared  valid,  as  far  as  bullion  and 
foreign  bills  of  exchange  were  concerned,  only  such  trades 
as  were  made  through  a  stockbroker. d 

Let  us  now  resume  our  account: 

It  is  a  settled  fact  that  in  France  commerce  is  free. 

This,  however,  does  not  apply  to  matters  of  brokerage 
in  securities,  under  the  old  law,  the  old  monarchical 
regime,  because  the  Government  considers  itself  entitled 

a  Ibid,  p.  108. 
&  Ibid,  pp.  in  and  115. 

c  Michelet,  Hisloire  du  XI  Xe  siecle.     Directoire  in  the  chapter  Quiberon. 
&  See  further  Ch.  Gomel,  Histoire  financiere  de  la  Legislative  et  de  la  Con- 
vention, Vol.  II,  Chap.  II. 


National    M on  et ar y     Commission 

to  dominate  the  public  place  where  the  Bourse  is  kept,  and 
to  sell  the  right  to  work.  That  state  of  things  ceased  with 
the  revolution. 

During  the  revolutionary  period  speculation  was  turned 
to  bullion  and  bills  of  exchange. 

The  convention  then  reestablished  the  monopoly  of 
stockbrokers,  which  had  not  long  ago  been  suppressed, 
because  it  ascribed  the  responsibility  for  the  occurrences 
to  speculation.  The  monopoly  was  applied  to  bullion 
and  bills  of  exchange  only. 

(6)  The  laws  which  have  in  some  way  reconstituted  the 
legal  prerogatives  of  bourse  operations  are:  The  law  of 
28  Ventose,  year  IX;  the  decree  of  27  Prairial,  year  X, 
and  the  Code  de  commerce,  in  1807 ;  the  first  two  provisions 
under  the  Consulate,  the  third  under  the  Empire. 

To-day  they  still  govern  the  matters  forming  the  subject 
of  the  present  work. 

The  law  of  28  Ventose,  year  IX,  and  the  Code  de  com- 
merce of  1807  conferred  on  stockbrokers  a  monopoly  of 
trade  in  government  and  other  securities  susceptible  of 
being  quoted. 

By  the  law  of  April  28,  1816,  stockbrokers,  as  well  as 
notaries,  barristers  practising  before  the  Cour  de  cassa- 
tion (highest  court  of  appeal  in  France),  lawyers,  court 
clerks,  bailiffs  (huissiers — officials  who  protest  bills,  notes, 
etc.),  merchandise  brokers,  and  appraisers,  acquire  the 
right  to  introduce  their  successors,  in  consideration  of 
additional  surety  bonds  aggregating  about  40,000,000 
francs  for  the  totality  of  these  ministerial  offices.  As 
to  the  stockbrokers,  their  bond,  which  had  then  been 
100,000  francs,  was  increased  to  125,000  francs.  The 


16 


History   and   Methods   of  the   Paris   Bourse 

interest  on  all  these  bonds  was  reduced  from  5  per  cent 
to  4  per  cent. 

The  stockbrokers  become  by  that  fact  the  owners  of 
their  offices.  The  right  to  introduce  a  successor  to  the 
Government  is  sold  by  the  holder  when  he  withdraws 
from  business.  It  is  only  thus  that  a  stockbroker  may 
sell  his  office. 

The  law  of  1816  has  always  been  severely  criticised. 
The  State  can  give  back  freedom  to  the  trade  in  secu- 
rities only  by  purchasing  the  commissions  or  indemnifying 
the  holders  of  these  commissions.  Well,  as  time  goes  on, 
securities  become  more  and  more  numerous,  and  conse- 
quently the  commissions  of  stockbrokers  must  become 
more  and  more  valuable.  Moreover,  the  more  the  State's 
budgets  tend  to  become  complicated  and  to  increase,  the 
less  easy  it  becomes,  in  consequence,  for  the  French  Gov- 
ernment to  place  the  financial  market  on  a  footing  con- 
sistent with  the  principle  of  freedom  of  trade. 

Thus  the  Bourse  in  France  rests  legally  on  the  basis  of 
these  old  laws  of  the  years  IX  and  1807. 

(7)  Several  attempts  have  beeji  made  to  modify  the 
legal  status  of  the  Bourse,  but  they  have  failed  for  sundry 
reasons.  The  last  attempt  took  place  in  1897.  Two 
Senators,  MM.  Trarieux  and  Boulanger,  presented  the  draft 
of  a  law  which  caused  a  discussion  of  the  finance  law  of  1 898. 
During  this  discussion  a  question  was  raised  relating  to 
the  mode  of  collecting  the  tax  on  bourse  operations,  in 
answer  to  which  the  Government  declared,  that,  taking 
for  a  basis  the  laws  then  in  force,  it  would  modify  the 
status  of  the  financial  market  simply  through  decrees. 


National    Monetary     Commission 

Indeed,  on  June  29,  1898,  the  Minister  issued  three 
decrees,  which,  respectively,  increased  the  number  of 
stockbrokers  in  Paris  from  60  to  70,  fixed  a  new  table  of 
brokerage,  and  modified  some  articles  in  the  decree  of 
October  7,  1870,  concerning  the  number  of  members  of 
the  Chambre  Syndicate  and  concerning  the  time  allowance 
for  settlements.  The  most  striking  modification  was  the 
new  provision  of  article  55  of  the  decree  of  October  7,  1890, 
which  created  what  has  been  called  the  Solidarity,  of 
Stockbrokers. 

The  totality  of  these  measures  received  the  name 
"Reorganisation  du  Marche  Financier"  (reorganization  of 
the  financial  market),  an  incorrect  designation,  since 
these  decrees  have  brought  no  modifying  element  in  the 
bases  of  the  bourse  organization,  as  the  present  organiza- 
tion is  no  other  than  that  of  the  year  IX.  But  the  use  of 
these  terms  aimed  to  cut  short  all  endeavor  toward  a  new 
organization,  and  to  suggest  to  public  opinion  the  consid- 
eration that  it  would  be  unwise  to  demand  new  reforms 
when  a  reorganization  had  but  recently  been  effected. 

(8)  It  behooves  us  finally  to  call  attention  to  one  of  the 
most  singular  phenomena  connected  with  the  age  of  the 
provisions  governing  the  bourse. 

None  of  the  reasons  which  influenced  the  establishment 
of  the  monopoly  of  stockbrokers  exists  to-day.  No  doubt, 
other  grounds  have  arisen  to  warrant  their  preservation, 
but  none  the  less  singular  is  the  phenomenon  presented 
by  an  institution  outliving  all  the  considerations  which 
determined  its  establishment. 

Indeed,  in  the  year  IX,  in  the  year  X,  and  in  1807,  a 
fundamental  consideration  quickened  the  legislator — the 


18 


History   and  Methods   of  the   Paris   Bourse 

discredit  fastened  upon  speculation.  Operations  for  future 
delivery  were  considered,  if  not  as  tabooed,  at  least  as 
having  become  impossible. 

Thus  it  was  that  the  broker  was  enjoined  to  have  in  his 
hands  at  the  moment  of  the  trade  both  the  securities  of 
the  seller  and  the  money  of  the  buyer.  (Art.  13  of  the 
decree  of  27  Prairial,  year  X.)  Finally,  speculations  were 
directed  toward  bills  of  exchange  and  government  securi- 
ties; and,  because  it  was  considered  necessary  for  the 
economic  welfare  that  official  intermediaries  be  appointed 
for  the  negotiation  of  bills  of  exchange,  bullion,  and  gov- 
ernment securities,  article'  76  of  the  Code  de  commerce 
declared  that  the  stockbrokers  (agents  de  change)  alone 
could  trade  for  account  of  others  in  bills  of  exchange, 
or  transact  dealings  in  bullion  brokerage  and  French 
government  securities.  The  official  quoting  of  foreign 
securities  remained  forbidden,  in  pursuance  of  the  Council's 
decree  of  August  7,  1785. 

At  present  the  prohibition  restraining  a  stockbroker 
from  giving  his  services  to  short  sellers  has  entirely  disap- 
peared. It  was  abolished  by  the  law  of  March  28,  1885, 
concerning  contracts  for  future  delivery.  That  same 
law  declared  these  kinds  of  contracts  legal,  even  when 
settled  by  paying  the  difference.  On  the  other  hand, 
stockbrokers  no  longer  negotiate  a  single  bill  of  exchange. 
The  bullion  brokerage,  which  could  be  concurrently  carried 
on  by  stockbrokers  (agents  de  change)  and  merchandise 
brokers  (courtiers),  either  class  by  itself  having  the  right 
to  trade,  is  free  since  1866. 

Further,  as  to  government  securities,  and  with  especial 
reference  to  French  rentes,  which  represent  government 


National    Monetary     Commission 

securities  par  excellence,  it  remains  to  be  said  that  free 
trading  in  them  is  tolerated,  although  not  legally  recog- 
nized, as  will  be  seen  later.  Finally,  it  should  be  noticed 
that  a  royal  ordinance  of  November  23,  1823,  abolished 
the  interdiction  to  quote  foreign  securities. 

The  monopoly  of  stockbrokers  has,  therefore,  lost  all  its 
grounds  for  subsisting. 

Nevertheless,  it  still  exists  in  law,  and  is,  moreover, 
sustained  by  it  more  strongly  than  ever. 

This  is  a  consideration  which  will  acquire  its  full  value 
when  the  subject  of  the  present  work  shall  have  been 
treated  in  full. 


20 


BOOK  II. — The  Bourse — The  traders — The  operations. 

FIRST  DIVISION. — Bourses — Merchandise  brokers — Stockbrokers — Curb 
brokers — Securities. 

1.  Commercial  exchanges  (Bourses  de  commerce} — Stock  exchanges    Page. 

(Bourses  des  valeurs} 23 

2.  The  brokers  on  the  commercial  bourses — Stockbrokers  (agents  de 

change}  are  the  traders  on  the  Bourse  des  -valeurs 23-24 

3.  The  functions  of  the  stockbrokers 24-25 

4.  The  curb  brokers  (coulissiers} 25-28 

5.  The exchange  brokers  (courtiers  de  change} 28 

6.  Which  are  the  securities  traded  in  on  the  Bourse — Government 

loans — Certificates  of  private  enterprises — Certificates  for 
stocks  and  bonds  fully  paid  in  and  partially  paid  in 29-30 

7.  Certificates  for  stocks  and   bonds  registered,  registered  as  to 

principal  only,  "  to  bearer" — Transfer  and  its  mechanism,  con- 
version of  certificates  "to  bearer"  into  registered  certificates, 
and  vice  versa 30-32 

SECOND  DIVISION. — The  operations  for  cash. 

8.  Operations  for  cash  (Operations  au  comptant} 33 

9.  Orders  at  a  fixed  price  (a  cours  fixe},  at  best  (au  mieux),  at  the 

average  rate  (au  cours  moyen},  on  the  floor  (au  Parquet}- 33~34 

10.  How  orders  for  cash  are  given  on  the  Coulisse  (au  marche  en 

Banque} ._.  35 

n.  What  amounts  can  be  traded  in  for  cash? — How  long  are  orders 

in  force? 35~36 

12.  The  quotation  list,  official   quotation  list,  curb  quotation  list 

(cote  en  Banque} 37~3^ 

13.  Settlement  of  operations  for  cash — Irregular,  counterfeit,  lost, 

stolen  certificates 38-39 

14.  Concerning  interest  accrued  on  certificates  traded  in 39 

15.  Certificates  must  be  in  order  as  regards  stamps  and  taxes 39 

16.  Expenses — Concerning  brokerage  with  the  stockbrokers  (on  the 

parquet) ,  with  the  bankers  (en  coulisse) 40 

17.  The  tax  on  bourse  operations — Receipt  stamp — Fee  for  record- 

ing on  the  statements  the  numbers  of  the  certificates  pur- 
chased   40-41 

18.  Transfer  and  transmission  fees 41 


21 


National    Monetary     Commission 


Page. 

1 9 .  Delays  in  delivering  registered  certificates.  _ 42 

20.  On  the  right  of  "execution"  (buying-in,  or  selling-out) 42-43 

21.  Delays  in  delivering  certificates  "to  bearer,"  on  the  right  of  "  exe- 

cution."    43-44 

22.  On  deliveries  and  "execution"  on  the  "Coulisse" 44~45 

THIRD  DIVISION. — Operations  for  future  delivery  (a  terme). 

23.  Operations  for  future    delivery — Definition — Taking  up  secu- 

rities— Delivering  securities — Differences 45 -47 

24.  Reports  (loans  for  "  carrying-over  "  operations) 47~49 

25.  Operations  in  certificates  "when  issued" 49 

26.  Options 49-5 1 

27.  Single  options 5I-54 

28.  Option  against  non-option 54~55 

29.  Non-option  against  option 55-56 

30.  Option  against  option 56-57 

31.  Usefulness  of  combinations  above  described 57~58 

32.  Put  and  call  (stellage) 59-62 

33.  Settlements — Option  declarations — The  clearing  system 62-63 

34.  Mechanism  of  the  clearing  system — The  making-up  price  (clear- 

ing price) 63-66 

35.  Some  practical  remarks — Nature  of  bourse  orders 66-67 

36.  How  long  do  orders  remain  in  force? 67 

37.  Covers 68 

38.  On  the  amounts  that  may  be  dealt  in 68 

39.  Discounting  privilege  (faculte"  d'escompte) 69 

40.  Small  options 69 

41.  What  the  quotation  list  shows 69-70 

42.  Fortnightly  and  monthly  settlements 70-7  2 

43.  State  of  securities  delivered  on  settlement  days 72 

44.  Defaulting  of  brokers  or  of  customers 7  2-74 

45.  Expenses — Transfers — Brokerages 74-76 

FOURTH  DIVISION. — On  Exchange — Concerning  the  negotiation  of  bills  of 
exchange  and  precious  metals. 

46.  Generalities 76 

47.  Mission  of  the  bill  of  exchange;  its  value  as  commercial  currency.  76-77 

48.  Exchange  fluctuations — "  Gold  point " 1 77~78 

49.  How  the  bill  of  exchange  is  made  negotiable 78-79 

50.  Exchange  quotations 79-80 

51.  "Short  paper"  and  "long  paper" 80-81 

52.  Special  functions  of  the  "long  paper;"  its  " pensioning " 81-82 

53.  Different  methods  of  quoting;  units  quoted 82-83 


22 


History   and   Methods   of  the   Paris   Bourse 

Page. 

54.  How  quotations  are  fixed 83 

55.  How  exchange  is  negotiated 83-85 

56.  Dealings  in  precious  metals 85 

FIFTH  DIVISION. — Bourses  in  the  Departments. 

57.  Generalities 85-86 

58.  Bourses  "  a  parquet,"  and  bourses  without  "  parquet" 86-88 

FIRST  DIVISION.     Bourses. — Brokers,  stockbrokers  (agents  de  change),  curb 
brokers  (coulissiers) . — Kinds  of  securities  dealt  in. 

(1)  The  Bourse  is  a  public  market  for  merchandise  and 
securities.     It  is  the  meeting  place  for  those  having  to 
deal  in  merchandise  or  securities,  either  for  their  own 
account  or  for  the  account  of  their  constituents.     In  the 
case  of  merchandise  proper — wheat,  flour,  spirits,  etc. — 
the  bourse  is  usually  called  Bourse  de  Commerce  (a  commer- 
cial bourse) .     In  the  case  of  securities  the  bourse  is  called 
Bourse  des  Valeurs  (a  stock  exchange) . 

The  operators  on  the  Bourse  de  Commerce  are  merchan- 
dise brokers  (courtiers  en  marchandises) .  The  profession 
of  merchandise  broker  is  free,  but  this  has  not  always 
been  the  case.  It  was  a  monopoly  under  the  old  regime. 
It  was  made  free  in  1791,  monopolized  again  in  the 
year  IX  of  the  Republic — that  is,  at  the  time  when  the  law- 
makers established  commercial  exchanges  (28  Ventdse), 
as  well  as  the  institution  of  stockbrokers — then  freed 
again  by  the  law  of  July  18,  1866. 

(2)  The  operators  on  the  Bourse  des  Valeurs  are  stock- 
brokers (agents  de  change) ,  whose  profession  is  monopolized. 
It  was  monopolized  under  the  old  regime,  like  the  profes- 
sion of  merchandise  broker,  with  which  it  was  long  con- 
founded.    It  was  made  free  by  the  law  of  March  17,  1791, 


National    Monetary     Commission 

and  monopolized  again  by  the  law  of  28  Vent6se,  year  IX. 
But  while,  in  1866,  the  law  again  freed  merchandise 
brokerage,  the  profession  of  stockbroker  remained  a 
monopoly.  It  is  so  still. 

(3)  The  stockbrokers  (agents  de  change}  are  not  the 
only  ones  to  operate  on  the  Bourse  as  brokers,  as  will  be 
seen  later.  The  following,  however,  are  the  prerogatives 
of  the  stockbrokers : 

1.  As  brokers  they  have  the  exclusive  right  to  trade  in 
government  or  other  securities  susceptible  of  being  quoted. 
(Art.  76  of  the  Code  de  commerce). a 

2.  As  brokers,  they  have  also  the  exclusive  right  to 
negotiate  bills  of  exchange,  notes,  and  all  commercial  in- 
struments.    (Art.  76  of  the  Code  de  commerce.) 

3.  To  verify  the  quotations  of  these  securities.     (Art. 
76  of  the  Code  de  commerce.) 

4.  Before  the  law  of  July  18,  1866,  they  divided  with 
the  merchandise  brokers  (courtiers)  the  privilege  of  deal- 
ing in  metals.     Brokerage  as  regards  mechandise  having 
become  free,  the  privilege  of  the  stockbrokers  disappeared 
on  that  account.     But  they  alone  have  the  right  to  verify 
the  quotations  of  metals.     (Art.  76  of  the  Code  de  com- 
merce.) 

5.  The  stockbrokers  give  the  necessary  certificates  for 
transfers   of  rentes,  on   the  terms   provided   for  by  the 

«  It  should  be  borne  in  mind  that  stockbrokers  are  not  permitted  to  reveal 
the  names  of  their  customers.  (Art.  19,  decree  of  27  Prairial,  year  X.) 
Therefore,  in  contradistinction  to  the  merchandise  broker  proper,  who 
places  the  parties  in  personal  contact  and  then  withdraws,  the  stockbroker 
bririgs  them  into  relation,  but  hides  their  identity.  The  stockbroker  is, 
therefore,  to  be  more  accurate,  a  commission  agent.  According  to  article 
94  of  the.  Code  de  commerce,  a  commission  agent  is  a  party  who  binds  himself 
in  his  own  name  between  the  parties. 


24 


History    and   Methods   of  the   Paris    Bourse 

decree  of  27  Prairial,  year  X,  royal  ordinance  of  April  14, 
1819,  and  the  decrees  of  July  12,  1883,  and  June  10,  1884. 
(Decree  of  October  7,  1890,  art.  76.) 

6.  They  are  intrusted  with  the  publication  of  the  Official 
Bulletin  of  Oppositions  to  the  Negotiation  of  Securities 
"to  Bearer."     (Law  of  June,  1872,  art.  n.)° 

7.  They  may  be  commissioned  by  the  courts  to  nego- 
tiate securities — especially,  pledged  securities.     Art.  93  of 
the  Code  de  commerce;  art.  70  of  the  decree  of  October  7, 
1890.) 

8.  They  may  be  commissioned  by  the  courts  to  dis- 
pose of  tne  property  of  minors  within  the  terms  pre- 
scribed by  the  law  of  February  27,  1880. 

The  stockbrokers  in  Paris  number  70.  (Later  we  shall 
speak  of  stockbrokers  in  the  provinces.) 

They  form  an  association,  and  a  part  of  them,  chosen 
by  ballot,  form  the  syndical  chamber,  composed  of  a  syn- 
dic and  eight  members,  and  intrusted  with  the  carrying 
out  of  disciplinary  measures,  along  with  all  general  matters 
concerning  the  collective  welfare  of  the  corporation.  The 
stockbrokers  are  named  by  decree  of  the  President  of  the 
Republic;  they  are  placed  under  the  disciplinary  rule  of 
the  Minister  of  Finance.  (The  stockbrokers  in  the  Depart- 
ments (provinces)  are  in  some  cases  under  the  Minister  of 
Finance,  and  in  others  under  the  Minister  of  Commerce.) 

(4)  Stockbrokers   alone  have  the  right,   according  to 

o  By  this  law,  the  dispossessed  owners  of  lost  or  stolen  certificates  are 
given  the  means  of  obtaining  duplicates  of  the  same  after  a  certain  delay. 
They  must  declare  their  protest  against  (faire  opposition}  the  negotiation 
of  their  certificates,  and  publish  a  note  to  that  effect  in  the  "Bulletin 
ojficiel  des  Oppositions."  All  negotiations  made  in  disregard  of  this  publi- 
cation are  rejected,  without  affecting  the  protesting  party.  (See  note  to 
No.  13.) — Translator. 


National    Monetary     Commission 

law,  to  trade  in  government  and  other  securities  suscep- 
tible of  being  quoted.  It  is  understood,  however,  that 
securities  which  have  not  been  explicitly  admitted  on  the 
official  quotation  list,  either  because  the  stockbrokers  did 
not  care  to  adopt  them,  or  because  the  securities  did  not 
fulfiH  the  required  statutory  conditions,  may,  nevertheless, 
be  dealt  in  outside  the  Bourse.0 

There  exist  for  this  purpose  free  intermediaries,  called 
bankers  (oftener  "coulissiers" — curb  brokers),  who  deal 
on  the  bankers'  market  (marche  en  banque),  known  as  the 
"coulisse,"  in  securities  called  bank  securities,  or  curb 
securities  (valeurs  en  banque  ou  vdleurs  de  coulisse) . 

Frequently,  one  may  hear  on  the  Bourse  these  two 
words  pronounced  in  opposition  to  one  another:  the 
Parquet  (the  floor) ,  the  Coulisse  (the  curb) .  By  Parquet 
is  meant  the  stockbrokers'  market,  on  account  of  the 
parquet  floor  on  which  they  stand.  The  Coulisse  (equiva- 
lent to  the  New  York  curb)  is  thus  called,  owing  to  the 
fact  that  formerly  the  bankers  congregated  in  a  narrow 
passageway  called  La  Coulisse. 

The  number  of  curb  brokers  (coulissiers)  is  not  limited. 
Anyone  can  become  a  curb  broker  who  wishes  to  estab- 
lish himself  as  such,  to  employ  sufficient  capital  for  meet- 
ing the  requirements  of  the  business,  to  pay  the  license, 
and  to  style  himself  banker.  But  a  certain  number  of  the 
bankers  club  together,  form  a  syndicate,  agree  upon  com- 
mon rules,  and  elect  a  syndical  chamber  authorized  to 
see  to  it  that  the  professional  discipline  is  lived  up  to. 
Thus  there  are  three  categories  outside  of  which,  we  must 

a  Decision  of  the  Cour  de  cassation  of  July  i,  1885.  Recueil  de  Sirey, 
1885,  i.  257. 


26 


History   and   Methods   of  the   Paris   Bourse 

again  repeat,  the  profession  remains  free.  They  are  the 
syndicate  of  bankers  dealing  in  securities  for  cash  (Syn- 
dicat  des  Banquiers  en  valeurs  au  comptant),  the  syndicate 
of  bankers  dealing  in  securities  for  future  delivery 
(Syndicat  des  Banquiers  en  valeurs  a  terme],  and  the  curb 
for  French  rentes  (la  Coulisse  des  rentes  francaises). 

It  should  be  noted  that,  although,  according  to  law, 
dealings  in  French  rentes  are  the  prerogative  of  the 
monopoly  of  stockbrokers,  and  any  intrusion  into  the 
business  reserved  for  them  is  an  offense  punishable  by 
fine,0  nevertheless  curb  brokers  are  tolerated  as  dealers  in 
French  rentes,  alongside  of  the  stockbrokers — thus  becom- 
ing their  powerful  competitors.  No  suit  is  brought  against 
them  for  interfering  with  the  business  of  the  stock- 
brokers, but  their  operations  are  not  valid  in  court.  For 
that  reason  the  curb  for  rentes  does  not  take  the  name  of 

a  Article  8  of  the  law  of  28  Ventose,  year  IX.  The  penalty  is  very 
severe.  It  is  a  fine  which  amounts  to  not  less  than  one-twelfth  of  the 
amount  of  the  surety  bond,  and  not  more  than  one-sixth.  Which  is  the 
bond  that  shall  be  taken  as  a  basis?  Shall  it  be  the  one  of  the  year  IX 
(60,000  francs)?  Is  it  the  present  bond  (250,000  francs)?  The  Cour  de 
cassation  took  as  a  basis  the  bond  at  the  time  the  offense  was  committed. 
(Aug.  28,  1857,  S  1857-1879;  Jan.  14,  1860,  S  1860,  i,  481,  Trib.  correc- 
tionnel  de  Lyon;  Mar.  12,  1906,  Journal  I' Information  of  May  9,  1906.) 
That  decision  is  sustained  by  M.  Boistel  (Droit  Commercial,  p.  431)  and  by 
M.  Ruben  de  Couder.  (Dictionnaire  de  Droit  Commercial,  V.  Agent  de 
Change,  112.)  But  it  is  sharply  criticized  by  most  authors  (Buchere 
Traite  des  Operations  de  Bourse  No.  114,  Lyon,  Caen  &  Renault,  Traite  de 
Droit  Commercial,  vol.  IV,  No.  904;  Mollot,  Bourses  de  Commerce,  No.  15, 
Dalloz,  Rep.  V,  Bourse  164;  Rolland  de  Villargues,  Rep.  du  Notariat,  v. 
Bourses  de  Commerce;  Albert  Broussois,  Du  Mono  pole  des  Agents  de  Change 
et  de  sa  Suppression,  p.  88).  No  extenuating  circumstances  are  allowed 
when  there  is  interference  with  the  functions  of  a  stockbroker.  (Tribunal 
correctionnel  Seine,  June  24,  1859;  and  on  appeal,  Paris,  August  2,  1859, 
S  1860,  i,  481);  Mollot,  Bourses  de  Commerce,  No.  16. — Ruben  de  Couder. 
Dictionnaire  de  Droit  Commercial,  No.  115. — Buchere,  Traite  des  Opera- 
tions de  Bourse,  No.  119. 


National    Monetary     Commission 

Syndicate.  Indeed,  professional  syndicates  are  recog- 
nized by  law,  and  may  bring  actions  and  sue  in  court.  It 
is  not  possible,  therefore,  to  recognize  under  the  name 
of  syndicates  associations  of  persons  carrying  on  an  un- 
lawful business.  The  toleration  enjoyed  by  the  curb 
market  in  rentes  originates  from  the  consideration  that 
the  credit  of  the  State  is  benefited  if  dealings  in  rentes  are 
as  free  and  extended  as  possible,  in  spite  of  the  fact  that 
the  law  intrusts  the  stockbrokers  alone  with  the  transac- 
tions in  government  securities. 

(5)  Finally,  another  category  of  bankers  busies  itself 
with  dealings  in  bills  of  exchange  and  treasury  bonds. 
The  law  likewise  reserves  for  the  stockbrokers  the  nego- 
tiation of  these  instruments,  but,  owing  to  the  expansion 
of  securities,  and  owing  to  the  fact  that  the  negotiation 
of  commercial  bills  of  exchange  is  little  remunerative,  the 
stockbrokers  relinquish  that  part  of  their  prerogatives  to 
free  commerce.  They  never  negotiate  a  bill  of  exchange; 
they  merely  receive  the  list  of  quotations  prepared  by  the 
bankers  and  insert  it  in  their  official  list.  The  free 
dealers  of  this  last  category  are  called  bankers  and  ex- 
change brokers  (courtiers  de  change).  The  word  " coulis- 
sier"  is  never  used  to  designate  them. 

Let  us  mention  that  these  bankers — traders  in  bills  of 
exchange — sometimes  indorse  the  bill  of  exchange  which 
is  the  object  of  the  operation;  they  then  negotiate  the 
bill  of  exchange  through  themselves  and  for  themselves, 
becoming  parties  to  the  contract.  When  they  only 
transfer  it  to  the  buyer  without  indorsing  it,  they  posi- 
tively act  as  brokers,  dealing  for  account  of  others. 


History   and   Methods   of  the    Paris    Bourse 

(6)  We  shall  now  briefly  review  the  nature  of  the 
securities  negotiated  by  stockbrokers  and  curb  brokers. 

We  shall  look  into  the  mechanism  of  operations  for  cash, 
and  the  mechanism  of  operations  for  future  delivery. 
Comparing  the  two,  we  shall  see  the  differences  in  the 
manner  they  are  traded  in,  either  on  the  Parquet  (stock- 
brokers' market)  or  on  the  Coulisse  (bankers'  market),  in 
the  manner  of  quoting,  and  in  the  modes  of  settlement; 
and,  finally,  we  shall  look  into  the  dealings  in  bills  of 
exchange. 

The  operations  on  the  Bourse  are  purchases  and  sales. 
They  bear  upon : — i ,  the  certificates  of  loans  of  states,  cities, 
counties  (departements) ,  and  territories  of  foreign  coun- 
tries having  an  organization  distinct  from  the  state,  such 
as  provinces  and  states  united  by  federal  bonds;  2,  the 
certificates  of  private  or  public  enterprises  constituted  as 
stock  companies — that  is,  the  shares  of  companies  called 
shares  of  common  stock,  shares  of  preferred  stock,  dividend 
shares,  profit  shares,  or  founders'  shares  (parts  de  fon- 
dateur),  and  the  certificates  of  indebtedness — bonds, 
debentures,  etc.  The  rules  for  operations  are,  some  of 
them  general  ones,  referring  to  the  ordinary  commercial 
conditions;  the  others  are  of  a  special  character,  relating 
to  the  traffic  in  securities  on  the  Bourse.  We  shall  take  as 
a  guide  the  rules  of  the  Paris  financial  market. 

Certificates  are  either  fully  paid  in  or  partially  paid  in. 
They  are  fully  paid  in  when  the  owner,  whether  he  be  the 
original  subscriber  or  the  assignee,  has  no  further  assess- 
ment to  make  on  the  certificate.  For  instance,  one  share 
of  100  francs  of  a  company  is  said  to  be  fully  paid  in,  when 
the  100  francs  of  money  it  represents  in  the  stated  capital 


National    Monetary     Commission 

have  been  paid  in  full.  The  certificates  are  partially  paid 
in,  when  there  remain  one  or  more  assessments  to  be  made, 
before  the  certificate  is  fully  paid  in.  For  instance,  one 
share  of  100  francs  is  "25  francs  paid  in. "  That  means 
that  there  remains  a  sum  of  75  francs  due  on  that  certifi- 
cate, to  be  effected  in  one  or  more  payments. 

(7)  Securities  are  issued  registered,  mixed  (registered  as 
to  principal  only),  or  "  to  bearer." 

The  registered  certificate  (litre  nominatif)  bears  the 
name  of  its  owner,  and  the  interest  or  dividends  are  pay- 
able on  presentation  of  the  certificate  itself.  The  mixed 
certificate  (litre  mixte)  is  different  from  the  preceding  one 
in  that  the  coupons  for  interest  and  dividends  may  be 
cut  off  from  the  certificate,  and  are  payable  to  bearer. 
The  certificate  "to  bearer"  (au  porteur)  does  not  bear 
the  name  of  the  owner;  the  holder  is  supposed  to  be  the 
owner,  and  the  coupons  are,  as  in  the  preceding  case,  pay- 
able to  the  party  presenting  them. 

The  delivery  to  the  purchaser  of  registered  or  mixed 
certificates  can  be  considered  good  delivery  only  when  the 
latter  has  been  entered  as  titulary  on  the  registers  of  the 
debtor  concern,  and  when  a  new  certificate  has  been  issued 
in  pursuance  of  that  operation.  That  operation  is  called 
transfer. 

There  are  three  kinds  of  transfers — the  transfer  "reel," 
the  transfer  "  d'ordre,  "  and  the  transfer  "  de  garantie.  " 

The  actual  (reel)  transfer  is  effected  by  means  of  a  request 
of  the  titulary  of  the  registered  certificate,  addressed  to  the 
debtor  concern,  aiming  at  the  cancellation  of  the  existing 
certificate  and  at  the  creation  of  a  new  one  in  the  name  of 
a  third  party.  The  transfer  is  a  deed  in  itself;  it  may  be 


History   and    Methods    of  the   Paris    Bourse 

the  consequence  either  of  a  gift  or  of  a  sale.  It  is  subject 
to  a  tax  of  0.75  per  cent. 

The  transfer  "d'ordre"  or  " de  forme"  has  for  its  object 
any  alteration  in  the  wording  of  the  registration  of  a  cer- 
tificate, resulting  from  a  deed  different  from  the  transfer 
declaration — whether  the  title  remains  vested  in  the 
name  of  the  same  titulary,  with  a  modification  of  his 
social  state,  or  it  is  transferred  to  a  new  titulary  (deed  of 
gift,  income  granted  by  deed  before  a  notary). 

These  transfers  are  free  of  tax,  because  they  are  made 
in  pursuance  of  deeds,  which  are  themselves  free  of  tax, 
or  of  deeds  for  which  the  tax  has  been  paid. 

Transfer  "d'ordre"  also  applies  to  an  operation  now 
obsolete,  the  object  of  which  was  to  safeguard  profes- 
sional secrecy  by  the  stockbrokers  (agents  de  change) ;  the 
stockbroker  signed  a  first  transfer  in  the  name  of  his 
fellow-broker,  the  buyer,  who  effected  the  transfer  in  the 
name  of  his  customer;  the  intermediate  transfer  is  called 
transfer  "d'ordre"  and  is  free  of  tax. 

This  latter  transfer,  like  the  transfer  "reel,"  has  become 
very  rare,  stockbrokers  making  a  practice  of  delivering  to 
one  another  only  certificates  "  to  bearer."  (Droit  de  1890, 
art.  47.) 

The  purpose  of  the  transfer  "  de  garantie"  (provided  for 
by  art.  91  of  the  Code  de  commerce)  is  to  establish  the 
pledge  of  certificates  the  transmission  of  which  is  effected 
by  a  transfer  on  the  books  of  the  company;  it  is  free  of 
tax,  because  it  does  not  carry  with  it  a  change  of  owner- 
ship. 

Conversion  is  the  act  of  causing  a  registered  or  mixed 
certificate  to  be  transformed  into  a  certificate  "  to  bearer," 

90312°— io 3  31 


National    M on  et ar y     Commission 

or  a  certificate  "to  bearer"  into  a  registered  or  mixed 
certificate. 

The  transfer  following  a  transaction  is  effected  as  fol- 
lows: The  seller  signs  a  transfer  blank,  by  which  he 
requires  the  company  whose  certificate  is  being  sold  (be 
it  a  government  or  private  corporation)  to  transfer  his 
status  of  bondholder  or  shareholder  to  the  purchaser. 
On  the  other  hand,  the  purchaser  signs  another  sheet, 
called  transfer  acceptance  blank.  The  seller  then  hands  in 
at  the  public  or  private  counter  (i)  his  transfer  blank, 
(2)  the  certificate,  and  (3)  the  transfer  acceptance  blank. 
When  the  operation  is  closed  by  the  entries  made  within 
the  debtor  establishment,  the  transfer  has  been  exe- 
cuted. A  new  certificate,  bearing  the  name  and  profes- 
sion of  the  purchaser,  is  handed  to  him.  Usually  it  is 
the  intermediary  of  the  seller  (stockbroker  or  banker) 
who  demands  the  transfer  in  the  name  of  his  customer. 
Many  corporations  will  not  effect  transfers,  unless  a 
stockbroker  (agent  de  change)  guarantees  the  signatures, 
even  when  the  sale  has  been  effected  without  the  help  of 
a  stockbroker.  Especially,  so  far  as  transfers  of  regis- 
tered certificates  of  French  rentes  are  concerned,  the 
signature  of  a  stockbroker  is  always  required. 

A  certificate  "  to  bearer  "  is  delivered  to  the  purchaser  by 
merely  being  handed  over  to  him.  Article  2279  of  the 
Code  civil  says:  "With  regard  to  chattels,  possession 
is  as  good  as  title."  These  words  mean  that  the  holding 
of  a  certificate  of  personal  property  leaves  it  for  granted 
that  the  holder  is  the  owner  thereof.  The  simple  handing 
over  of  a  certificate  ' '  to  bearer ' '  transfers  the  ownership 
thereof. 


History   and   Methods   of  the   Paris   Bourse 

SECOND  DIVISION. — Operations  for  cash  (operations  au  comptant). 

(8)  Bourse  operations  are  made  for  cash  or  for  future 
delivery    (au  comptant  ou  a  terme).     The  operation  for 
cash  is  an  operation  to  be  settled  immediately  or  after  a 
very  short  delay — certificate  against  cash,  cash  against 
certificate.     The  operation  for  future  delivery  (operation 
a  terme)  is  to  be  settled  within  a  period  fixed  in  advance. 
We  shall  first  consider  operations  for  cash. 

It  is  very  easy  to  understand  the  mechanism  of  opera- 
tions, if  we  follow  in  their  logical  order  the  successive  stages 
of  execution.  How  is  a  bourse  order  given?  Let  us  follow 
that  order  to  the  market  and  let  us  see  how  it  will  be  exe- 
cuted. When  executed,  how  will  it  be  checked  by  the 
party  who  gave  it;  how  will  the  operation  be  settled; 
what  expenses  are  to  be  borne  by  the  party  who  gave  the 
order;  the  delays  it  shall  be  subjected  to;  what  are  the 
means  of  recourse  in  case  of  delay  or  default  of  the  party 
who  received  the  order;  for  what  is  the  party  who  gives 
an  order  liable,  when  he  infringes  the  essential  conditions  of 
the  contract?  To  all  these  questions  the  following  expla- 
nations will  give  an  answer,  showing  at  the  same  time  the 
workings  of  the  financial  market. 

(9)  Orders  are  given  to  stockbrokers  either  at  a  fixed 
price  (a  cours  fixe) ,  or  at  best  (au  mieux) ,  or  at  the  average 
price  (au  cours  moyen) .     Instance  of  an  order  at  fixed  price: 
"Please  buy  i  bond  of  the  Credit  Fonder  1895  at  465 
francs;"  or  "Please  sell  3  shares  of  the  Edison  Company 
at  1,100  francs;"  or  "Please  buy  3  francs  French  Rente 
Z%%  at  98  francs." 

An  order  at  best  shall  be  worded  in  the  same  way;  but 
no  price  shall  be  fixed,  because  the  stockbroker  will  buy 

33 


National    Monetary     Commission 

or  sell  at  the  price  at  which  he  will  be  able  to  buy  or  to 
sell.  For  an  order  at  the  average  price,  the  indication  of 
price  shall  be  replaced  by  the  words  "  cours  moyen  "  (aver- 
age price),  or  simply  by  the  letters  "c.  m." 

"Cours  moyen"  (average  price)  is  a  price  halfway  be- 
tween the  highest  and  the  lowest  prices  quoted.  "Avant 
bourse"  (before  the  opening) ,  that  is  to  say,  before  the 
opening  of  the  session,  the  stockbrokers  and  their  clerks 
meet  in  a  special  room.  Some  offer,  and  others  ask  for, 
securities  at  the  average  price.  Neither  know  what  the 
price  will  be;  that  will  be  decided  during  the  session. 
When  an  offer  and  a  demand  coincide,  the  transaction  is 
closed.  Only  the  price  is  missing.  A  ring  of  the  bell  an- 
nounces the  opening  of  the  bourse  session;  the  stock- 
brokers and  their  clerks  leave  the  special  room  and  pro- 
ceed to  the  public  hall  around  the  railed  inclosures. 
The  session  begins.  As  the  dealers  execute  orders,  they 
give  the  prices  to  a  marker,  whose  entries  will  serve  to 
make  up  the  quotation  list.  The  quotation  list  having 
been  made  up,  the  parties  who  have  traded  on  the  basis  of 
the  average  rate,  will  be  able  to  ascertain  that  average,  by 
merely  taking  the  highest  and  the  lowest  rates. 

If  only  one  price  is  quoted,  that  single  price  shall  take 
the  place  of  the  average  price. 

If  there  are  no  quotations,  the  operations  are  considered 
as  "non  faites"  (not  executed). 

It  may  happen  that  an  order  given  at  the  average  rate 
is  not  executed.  The  stockbroker  (agent  de  change)  may 
have  been  unable  to  find  a  counterpart.  The  party  giving 
the  order  can  make  no  claim  on  that  account. 


34 


History   and   Methods   of  the   Paris   Bourse 

(10)  In  the  bankers'  market,  that  is  to  say,  "en  cou- 
lisse" (on  the  curb),  orders  are  received  either  at  fixed 
prices  or  at  best.  The  bankers  do  not  trade  on  the  basis 
of  average  price.  The  party  giving  an  order  and  the 
banker  may,  however,  contract  that  a  certain  operation 
shall  be  executed  at  the  average  rate;  but  in  such  cases 
the  banker  will  have  contracted  a  personal  obligation,  and 
the  operation  contracted  with  his  client  will  be  distinct 
from  the  one  closed  in  the  public  market. a 

(n)  Later,  when  we  turn  to  transactions  for  future  de- 
livery (operations  a  terme) ,  we  shall  see  that  such  transac- 
tions can  not  be  made  for  less  than  25  shares  or  for  less 
than  a  certain  number  of  francs  of  government  rentes. 
But  it  should  be  borne  in  mind  that  for  cash  the  minimum 
to  be  traded  in  is  one  unit;  that  is  to  say,  one  share,  one 
bond,  one  debenture,  etc.  Some  bonds,  especially  the 
bonds  of  the  city  of  Paris  or  of  the  Credit  Fonder  (Mort- 
gage-loan Society),  are  divided  into  quarters  and  into 
fifths.  Then  such  portions  bear  the  name  "quarter  of  a 
bond,"  "fifth  of  a  bond." 

Orders  remain  in  force  according  to  agreement  between 
the  parties.  An  order  may  be  given,  good  for  the  day's 
session,  or  until  canceled — that  is  to  say,  up  to  the  time 
jvhen  the  party  giving  the  order  shall  have  expressed  the 

a  The  stockbroker  (agent  de  change)  can  not  personally  make  a  contract 
with  his  customer.  Article  85  of  the  Code  de  commerce  forbids  him  dealing 
for  his  own  account.  The  result  is,  with  a  bourse  order  in  hand,  he  can  not 
enter  into  a  private  agreement  with  the  party  giving  the  order  concerning 
the  execution  of  same.  However,  article  85  of  the  Code  de  commerce  was 
especially  intended  for  the  stockbroker;  the  banker  (curb  broker)  may  enter 
into  a  personal  agreement  and  act  for  himself.  In  practice,  when  he  per- 
sonally becomes  a  party  to  the  contract,  he  must  notify  his  client  of  the 
fact.  In  certain  cases  the  personal  intervention  of  the  broker  is  the  result 
of  circumstances. 


35 


National     Monetary     Commission 

desire  to  withdraw  it,  if  it  has  not  been  filled.  However, 
to  avoid  errors,  stockbrokers  and  bankers  often  stipulate 
that,  unless  notified  to  the  contrary,  every  order  is  con- 
sidered as  remaining  in  force  until  canceled.  But  even 
orders,  good  until  canceled,  can  not  remain  in  force  for  an 
unlimited  period.  Therefore,  it  is  often  understood  that 
if  an  order,  good  until  canceled,  has  not  been  executed 
during  the  first  week,  it  shall  be  considered  as  canceled,  so 
that,  within  each  banking  house  or  each  stockbroker's 
office,  new  orders  are  issued  every  Monday.  This  con- 
dition is  often  mentioned  on  the  printed  forms  of  stock- 
brokers and  bankers,  who  thus  protect  themselves  against 
any  eventuality. 

When,  after  the  closing  of  the  Bourse,  the  stockbrokers 
and  bankers  return  to  their  respective  offices,  they  start 
checking.  They  sort  out  the  trades  they  have  made 
with  their  colleagues,  and  send  to  one  another  confirma- 
tions of  the  closed  transactions,  in  order  to  avoid  all 
possible  errors.  It  is  very  apparent  that  during  the 
scramble  and  noise  errors  may  occur.  One  has  bought 
instead  of  selling,  another  has  bought  or  sold  too  much. 
It  happens,  also,  that  a  figure  has  not  been  correctly  under- 
stood, or  erroneously  entered  on  the  blotter.  In  short, 
operations  having  been  verbally  contracted  on  the  Bourse, 
it  is  necessary  that  this  fiduciary  process  be  replaced  by 
a  safer  one.  The  checking  includes,  also,  the  entering  on 
the  books,  of  the  transactions  effected,  as  well  as  of  the 
names  of  the  parties  who  had  given  the  orders,  and  for 
whose  account  they  were  executed.  Notice  thereof  is  at 
once  sent  to  them. 


History    and   Methods   of  the   Paris    Bourse 

(12)  The  party  who  gave  the  order,  can  control  the 
notice  he  receives  by  means  of  the  quotation  list.  He 
must  be  advised  of  the  execution  of  his  orders  at  quota- 
tions within  the  limits  of  published  prices.  No  doubt, 
in  some  cases  he  may  rightfully  claim  more  favorable 
prices  than  those  reported  to  him,  although  the  prices  at 
which  his  orders  were  executed  have  actually  prevailed. 
In  such  a  case,  his  representative  has  been  disloyal.  It 
may  be  realized  that  in  that  line  of  reasoning  it  is  impos- 
sible to  foresee  the  nature  of  the  discussions  that  may 
ensue.  The  party  who  gave  the  order,  will  then  apply 
for  redress  to  the  Syndical  Chambers  of  stockbrokers  or 
bankers  (aux  chambres  syndicates  des  agents  de  change 
ou  banquiers),  and,  if  need  be,  to  the  courts.  The  fact 
remains  that  in  most  cases  the  controlling  means  is  fur- 
nished by  the  quotation  list. 

The  prices  of  securities  listed  by  the  stockbrokers, 
(agents  de  change)  are  published  on  a  sheet  called  "Cote 
Officielle"  (official  price  list). 

The  prices  of  curb  securities  (Les  cours  des  valeurs  de 
coulisse),  listed  by  the  "Syndicat  des  Banquiers  au  comp- 
tant"  (syndicate  of  bankers  trading  for  cash),  are  pub- 
lished in  a  special  list  called  "Cote  du  Syndicat  des  Ban- 
quiers en  valeurs  au  comptant"  (price  list  of  the  syndicate 
of  bankers  trading  in  securities  for  cash) . 

The  prices  of  curb  securities  which  are  not  listed  by 
any  syndicate,  and  which  are  traded  in  owing  to  the 
natural  phenomenon  of  offers  and  bids  for  securities 
tending  to  concur  to  the  same  place,  are  recorded  on  free 
quotation  lists.  These  last,  besides,  publish  the  quota- 
tions of  all  other  securities;  those  of  the  official  market, 


37 


National    M  on  et  ar  y     Commission 

and  those  of  the  curb  syndicates.  The  best  known  are 
"  Le  cours  de  la  Banque  et  de  la  Bourse  (cote  Des fosses)  " 
and  "La  cote  de  la  Bourse  et  de  la  Banque  (cote  Vidal)." 

On  the  official  list  of  the  stockbrokers  (Cote  Officielle 
des  agents  de  change)  the  prices  are  given  in  the  order  of 
transactions.  The  "Cote  du  Syndicat  des  Banquiers  en 
-valeurs  au  comptant"  gives  only  the  lowest  and  highest 
quotations.  The  free  quotation  lists,  however,  give  also 
the  closing  prices  of  the  curb  securities. 

(13)  When  a  stockbroker  or  banker,  buying  for  account 
of  a  party  who  gave  an  order,  has  received  the  securities, 
the  settlement  is  effected  when  he  has  delivered  them  and 
received  the  cash.  The  same  applies  to  the  stockbroker 
or  banker  selling,  in  his  intercourse  with  the  party  who 
gave  the  order. 

The  securities  must  be  "  good  delivery,"  free  of  all  oppo- 
sition to  their  negotiation,  and  with  the  interest  agreed 
upon. 

The  stockbroker  or  the  banker  who  should  happen  to 
deliver  counterfeit  securities,  or  lost  or  stolen  securities, 
with  an  opposition  existing  to  their  being  negotiated, 
would  find  himself  exposed  to  have  his  deliveries  refused, 
or  sentenced  to  deliver  securities  of  good  delivery  and  free 
from  defects.0  By  application  of  the  same  principle,  the 

aThe  owner  deprived  of  his  securities  "to  bearer"  has  the  right  to  make 
opposition  to  their  being  negotiated,  and  to  the  interest  and  dividends  and 
principal  demandable  being  paid,  by  means  of  a  special  process  provided 
for  by  the  laws  of  June  15,  1872,  and  February  8,  1902.  He  thus  puts 
himself  in  a  position  to  obtain  duplicates  of  his  securities  after  a  certain 
time.  Unfortunately,  this  sort  of  proceeding  does  not  apply  to  securities 
dealt  in  abroad.  It  would  be  desirable  that  an  International  Congress 
should  prepare  a  similar  clearing  in  every  country,  and  thus  insure  the  safe- 
guarding of  owners  against  the  loss  and  theft  of  securities  "to  bearer." 


History   and   Methods   of  the   Paris   Bourse 

stockbroker  or  banker  is  not  allowed  to  deliver  bonds 
drawn  for  redemption  or  subject  to  certain  conditions.0 

(14)  The  "jouissance"   (interest  accrued)   is  the  right 
to  the  interest  or  the  dividends.     It  starts  from  the  date  of 
the  last  payment.     Instance:  On  October  19,  1908,  French 
rentes  3  per  cent  were  quoted  for  cash  95.40  francs,  jouis- 
sance  October,   1908.     These  last  words  mean  that  the 
purchaser  is  entitled  to  the  interest  coupon  following  the 
one  of  October,  1908.     This  latter  one  has  been  cut  by 
the  owner,  who  had  the  benefit  of  his  property. 

For  shares  of  corporations,  the  coupons  are  numbered. 
They  are  traded  in,  for  instance,  ' 'ex-coupon"  6  or  7,  which 
means  that  the  purchaser  shall  only  be  entitled  to  the 
dividend  coupons  subsequent  to  coupon  6  or  coupon  y.6 

Securities  which  are  irregular  as  to  the  interest  accrued, 
may  be  rejected.  However,  within  the  month  preceding 
maturity,  if  the  owner  has  detached  the  coupon,  he  may 
sell  and  make  a  good  delivery,  but  the  purchaser  will 
deduct  the  amount  of  the  missing  coupon  when  settling. 
This  option  applies  only  to  French  securities. 

(15)  Finally,  securities  dealt  in  are  supposed  to  be  in 
order  with  the  internal  revenue  concerning  the  payment 
of  stamp  taxes  to  which  securities  are  subjected. 

a  To  avoid  all  trouble  in  this  regard,  the  transactions  in  securities  subject 
to  drawings  are  made  on  the  stock  exchange  "ex  droit"  (minus  the  right)  to 
the  advantage  obtained  by  the  drawing,  a  few  days  before  it  takes  place 
(art.  45  of  the  regulations  of  stockbrokers  of  Jan.  30,  1899);  five  days 
before,  for  bonds  "to  bearer,"  and  seven  days  before,  for  registered  bonds. 

6  On  the  Paris  Bourse  the  coupons  of  French  rentes  are  considered  as 
detached  fifteen  days  before  their  maturity.  French  rentes  3  per  cent 
certificates  are  provided  with  coupons  maturing  January  i,  April  i,  July  i, 
and  October  i.  They  are  dealt  in  "interest  accrued  from  January,  begin- 
ning from  the  preceding  December  16;  interest  accrued  from  April,  begin- 
ning from  the  preceding  March  16;  interest  accrued  from  July,  beginning 
from  the  preceding  June  16,  and  interest  accrued  from  October,  beginning 

from  the  preceding  September  16  " 

» 

39 


National    Monetary     Commission 

(16)  The  expenses  to  be  borne  by  the  party  who  gives 
the  orders,  are  the  brokerage,  the  duty  on  bourse  oper- 
ations, the  receipt  stamp,  and,  in  some  cases,  the  fee  for 
entering  the  numbers  of  certificates  on  the  statement ;  also 
the  transfer  fee  on  registered  certificates. 

The  brokerage  (courtage)  of  stockbrokers  (agents  de 
change)  is  o.io  per  cent  of  the  net  amount  of  the  trans- 
action, with  a  minimum  of  0.50  francs  on  each  statement. 
The  fee  is  raised  to  0.25  per  cent  of  the  amount  on  transac- 
tions resulting  from  matters  in  litigation.  These  rates  are 
binding  on  all  stockbrokers.0 

The  rates  of  brokerage  on  the  Coulisse  are  unrestricted. 
However,  in  most  cases,  there  is  a  charge  of  25  centimes 
for  certificates  worth  less  than  250  francs  and  of  o.io  per 
cent  for  certificates  worth  more  than  that.  The  minimum 
charge  is  50  centimes. 

Two  orders  executed  at  the  same  session,  one  for  a 
purchase  and  one  for  a  sale,  occasion  but  one  brokerage 
(what  is  called  the  "franco'').  The  brokerage  is  figured 
on  the  transactions  either  on  the  side  of  sales  or  on  the  side 
of  purchases — whichever  gives  rise  to  the  larger  fee. 

But  in  order  to  obtain  "franco,"  the  transactions  must 
have  taken  place  in  the  same  market.  In  other  words, 
there  is  no  "franco"  between  securities  dealt  in  by  the 
stockbrokers  and  securities  dealt  in  by  the  bankers. 

(17)  The  tax  on  bourse  operations  is,  for  each  party  to 
the  contract,  5  centimes   per    1,000   francs,  or  fractions 
thereof;  that  tax  is  reduced  to  one-quarter  (0.0125  francs 
per  fraction  of  i  ,000  francs)  on  all  transactions  in  French 
rentes.     (Law  of  Apr.  28,  1893,  and  Dec.  31,  1907.) 

a  They  have  been  fixed  by  a  ministerial  decree  of  July  22,  1901. 

* 

40 


History   and   Methods   of  the   Paris    Bourse 

Statements  containing  receipts  for  securities  or  receipts 
for  money,  are  subject  to  the  special  receipt  stamp  of  10 
centimes,  established  by  the  law  of  August  23,  1871. 

Any  purchaser  of  securities  may  require  his  stock- 
broker to  enter  the  numbers  on  tfie  delivery  statement. 
This  record  is  subject  to  a  fee  of  5  centimes  for  each  cer- 
tificate. (Art.  13  of  the  law  of  June  15,  1872,  and  art.  n 
of  the  law  of  Apr.  10,  1873.) 

(18)  The  transfer  of  a  registered  or  mixed  certificate, 
and  the  conversion  of  either  into  a  certificate  "  to  bearer," 
are  subject  to  a  special  tax  called  "  droit  de  transmission  " 
(transfer  tax) . 

That  tax  is  0.75  per  cent  net — that  is  to  say,  exempting 
income  of  later  maturity.  (Laws  of  June  13,  1857,  June 
16,  1871,  June  23,  1872,  and  Dec.  26,  1908.) 

The  transfer  tax  is  borne  by  the  purchaser.  It  is  col- 
lected by  the  corporation  for  account  of  the  treasury 
(pour  le  compte  du  Tresor)  at  the  time  the  transfer  is 
made.  Disbursed  by  the  banker  or  stockbroker,  for 
account  of  the  purchaser,  it  must  be  reimbursed  at  once 
by  the  latter. 

Transfers  of  French  rentes,  resulting  from  sales,  are 
free  of  the  75-centime  (0.75  per  cent)  tax.a 

a  There  is  a  transfer  tax  on  securities  "  to  bearer."  That  transfer  tax  is 
paid  by  the  corporations  and  various  establishments;  but  these  have  re- 
course against  the  holders  of  their  securities  at  the  time  the  interest  and  divi- 
dends are  paid.  That  fee  is  25  centimes  per  100  francs  (0.25  per  cent)  with- 
out extra  tithes  (secondary  fees).  (Art.  3  of  the  law  of  June  29,  1872,  and  of 
Dec.  26,  1908.)  It  is  a  yearly  and  obligatory  tax,  figured  on  the  capital  of 
all  securities,  appraised  on  their  average  price  during  the  preceding  year,  or, 
for  want  of  a  rate,  by  appraising  according  to  the  rules  provided  by  article 
1 6  of  the  law  of  22  Frimaire,  year  VII.  There  is  no  transfer  charge  on 
certificates  "  to  bearer"  of  French  and  foreign  rentes.  The  conversion  of 
certificates  "  to  bearer"  into  registered  certificates  is  free  of  taxes,  according 
to  the  law  of  December  26,  1908. 

41 


National    Monetary     Commission 

(19)  The  time  for  delivery  differs  in  the  cases  of  reg- 
istered certificates  or  certificates  "to  bearer." 

Registered  certificates  that  have  been  purchased  must 
be  at  the  disposal  of  the  party  who  gave  the  order,  the 
very  next  day  after  tTiey  have  been  received  at  the  office 
of  the  stockbroker.  If,  after  the  twentieth  session  follow- 
ing the  one  when  the  transaction  was  effected,  the  securi- 
ties have  not  been  handed  to  the  party  who  gave  the 
order,  the  latter  may  call  upon  the  stockbroker  to  fulfill 
the  contract,  and  give  notice  of  said  notification  to  the 
Syndical  Chamber  of  Stockbrokers  (Chambre  syndicate  des 
agents  de  change) ,  which  shall  take  the  necessary  measures 
to  insure  the  carrying  out  of  the  contract,  at  the  risk  of 
the  stockbroker.  In  Paris  the  Syndical  Chamber  can  not 
decline  to  effect  that  execution  (then  it  is  said  that  the 
stockbroker  is  "executed")  even  if  the  syndical  chamber 
has  to  bear  the  consequences. 

(20)  The  stockbroker,  buying,  who  has  not  received  the 
securities  from  his  fellow-member,  selling,  may,  at  the 
fifteenth  session  following  the  session  at  which  the  trans- 
action took  place,  disclose  said  fellow-member,  seller,  and 
call  upon  the  Syndical  Chamber  of  Stockbrokers  to  pur- 
chase ("buy  in")  the  securities  for  account  of  said  seller, 
and  at  the  risk  of  the  latter. 

The  proceeds  from  sales  of  registered  securities  must  be 
placed  at  the  disposal  of  the  party  who  gives  the  order, 
on  the  day  following  the  completion  of  the  transfer. 
Having  waited  until  after  the  twentieth  session  follow- 
ing the  transaction,  the  party  who  gives  the  order  to  sell, 
may  have  recourse  to  the  same  measures  which,  we  saw, 
the  purchaser  may  resort  to — that  is  to  say,  cause  the 


History   and   Methods   of  the   Paris   Bourse 

"execution"  of  the  stockbroker.  On  his  side,  the  stock- 
broker, selling,  may,  at  the  fifteenth  session  following  the 
one  of  the  transaction,  demand  the  "execution"  of  his 
fellow-member  through  the  Syndical  Chamber. 

The  above-mentioned  delays  are  increased  by  eight  days 
for  securities,  the  transfers  of  which  are  subject  to  the 
approval  of  the  boards  of  directors. 

(21)  Securities  "to  bearer"  must  be  placed  at  the  dis- 
posal of  the  buyers,  on  the  very  day  following  the  delivery 
effected  by  the  sellers.  In  their  intercourse  between  them- 
selves, the  stockbrokers  must  deliver  securities  before  the 
tenth  session  following  the  transaction.  After  that  time 
they  must  exact  the  "buying  in "  for  account  of  the  stock- 
broker, seller,  through  their  Syndical  Chamber.  On  his 
side,  the  party  who  gave  the  order,  may,  after  the  fifteenth 
session  following  the  one  of  the  transaction,  and  after 
having  called  upon  the  stockbroker  to  effect  delivery, 
give  notice  of  this  call  to  the  Syndical  Chamber  of  Stock- 
brokers, within  twenty-four  hours  of  the  same,  but  must 
not  use  legal  formalities.  The  Syndical  Chamber  will 
take  the  necessary  steps,  and,  if  need  be,  it  will  itself 
insure  the  proper  execution  of  the  contract.  (Art.  55  of 
decree  of  June  29,  1898.) 

The  proceeds  from  sales  must  be  at  the  disposal  of  the 
party  who  gave  the  order,  two  days  after  the  securities 
have  been  handed  to  the  stockbroker.  It  should  also 
be  noted  that  .the  stockbroker,  selling,  when  dealing  with 
a  fellow-member  who  does  not  accept  delivery,  may  en- 
force purchase  through  the  Syndical  Chamber  for  account 
of  his  fellow-member,  buying,  after  the  tenth  session  fol- 
lowing the  transaction.  The  party  giving  an  order  of 


43 


National     M  o  n  et  ar  y     Commission 

sale,  who  has  not  received  a  settlement  after  the  fifteenth 
session,  may  apply  to  the  Syndical  Chamber  of  Stock- 
brokers, as  has  been  said  concerning  the  party  giving 
purchasing  orders. 

(22)  Dealings  on  the  curb  are  not  subject  to  the  same 
delay  in  respect  to  deliveries.  In  theory,  we  may  con- 
ceive that  a  buyer  or  seller  for  cash  may  exact  the  delivery 
of  his  securities  or  payment  immediately  after  the  trans- 
action, provided  he  can  on  the  spot  fulfill  the  obligations 
of  the  purchaser  or  seller,  which  consist  in  paying  the 
purchase  money  or  delivering  the  securities  sold,  as  the 
case  may  be;  however,  a  certain  delay  is  unavoidable  on 
account  of  the  banker,  who  acts  as  an  intermediary,  and 
who  is,  in  fact,  himself  subjected  to  delays.  The  Asso- 
ciated Bankers  of  the  City  of  Paris  (Les  Banquiers  Syn- 
diques  du  marche  de  Paris),  united  in  a  professional 
syndicate  within  the  provisions  of  the  law  of  May  21, 
1884,  established  the  rule  that  securities  "to  bearer" 
must  be  delivered  by  the  seller  before  the  seventh  session 
following  the  transaction.  After  that  delay  the  buyer 
may  make  a  demand  on  the  seller  by  registered  letter,  at 
the  same  time  notifying  the  Syndical  Chamber  of  that 
syndicate.  The  latter  effects  the  "  buying  in  "  for  account 
of  the  defaulter  at  the  tenth  session  following  the  day 
when  it  will  have  received  the  advice. 

The  party  giving  an  order  may  also  be  "executed." 
A  stockbroker  is  not  bound  to  accept  an  order  if,  previ- 
ous to  all  trading,  he  has  not  received  the  securities  to  be 
disposed  of,  or  the  funds  intended  to  settle  for  the 
amount.  But  he  may  have  been  led  to  grant  credit  to 
the  party  giving  the  order.  In  such  a  case,  if,  after 


44 


History    and    Methods    of  the    Paris    Bourse 

notice  by  registered  mail,  the  party  who  gave  the  order; 
has  not,  within  three  days  from  the  time  the  letter  was 
sent,  come  up  with  the  securities  or  the  cash,  the  "  buying 
in"  of  the  securities  sold,  or  the  "selling  out"  of  the 
securities  purchased,  may  be  proceeded  with  immediately. 

THIRD  DIVISION. — Operations  for  future  delivery  (a  terme). 

(23)  An  operation  for  future  delivery  is  one  engaging 
the  parties  from  the  day  of  the  contract,  but  the  execution 
of  which  is  put  off  to  a  maturity  fixed  in  advance.0  For 
instance:  Peter  buys  on  the  ist  of  the  month  100  shares 
for  the  1 5th  of  the  current  month  at  100  francs.6  On  the 
1 5th  of  the  month,  date  of  maturity — that  is,  the  day  of 
settlement — the  winding  up  of  the  operation  will  take 
place.  Peter  must  accept  delivery  of  the  stock  and  pay 
the  price — 10,000  francs. c 

On  the  other  hand,  if  he  has  sold  100  shares  at  100 
francs,  he  will  have  to  deliver  on  settling  day — that  is,  on 
the  1 5th  of  the  month — 100  shares,  and  receive  iv.,ooo 
francs. d 

Hence,  the  first  settlement  following  operations  for 
future  delivery  is  the  taking  up  of  securities  bought  by 
the  purchaser,  and  the  delivery  of  securities  sold  by  the 
seller. 

It  may  happen  that  the  purchaser  for  future  delivery 
does  not  wish  to  take  up  the  securities  purchased.  In 
such  a  case,  he  will  resell  them  for  the  same  maturity, 
and  these  two  operations  will  show  a  difference,  which, 

a  Art    1 185  of  the  Code  civil. 

&  In  the  instances  mentioned  no  account  is  taken  of  taxes  or  brokerages; 
this  is  done  for  the  sake  of  simplicity. 
c  Art    1650  of  the  Code  civil. 
d  Article  1603  of  the  Code  civil. 

45 


National    Monetary     Commission 

according  to  circumstances,  will  cause  him  to  be  debtor 
or  creditor. 

Instance:  Peter,  buyer  of  100  shares  at  100  francs, 
resells  them  at  no:  Debtor  of  10,000  francs,  creditor  of 
n,ooo,  he  retires  with  a  balance  in  his  favor  of  1,000 
francs. 

On  the  other  hand,  if  he  has  resold  with  a  loss,  for 
instance  at  90  francs,  then,  being  a  debtor  of  10,000 
francs  and  a  creditor  of  9,000  francs,  he  retires  with  a 
balance  against  him  of  i  ,000  francs. 

To  purchase  with  a  view  of  reselling  at  a  higher  price, 
is  called  to  speculate  for  a  rise  (tire  a  la  hausse). 

To  speculate  for  a  fall  (Hre  a  la  baisse)  is  to  make  the 
reverse  operation,  that  is,  to  sell  first  with  the  hope  of 
buying  in  later  at  a  lower  price.0  Let  us  take  up  the 
various  instances,  by  illustrating  them  with  the  account- 
ing which  results  from  these  transactions,  in  order  to 
comprehend  better  their  working. 

When  Peter  has  bought  with  the  intention  to  resell,  and 
then  has  resold,  or  when  he  has  sold  with  the  intention 
to  repurchase,  and  then  has  repurchased,  the  result  on 

« Some  people  experience  difficulty  in  understanding  the  "short"  sale 
(vente  &  dtcouvert)  which  is  the  original  transaction  of  speculation  for  a  fall. 
It  is  often  considered  as  illegitimate.  The  following  anecdote  will  explain 
and  justify  it. 

"M  Boscary  de  Villeplaine,  deputy  syndic  of  the  association  of  stock- 
brokers, was  conversing  with  Napoleon  regarding  the  discussion  in  the 
council  of  state  of  article  422  of  the  Penal  Code  (now  repealed)  '  Your 
Majesty,'  said  M,  Boscary  de  Villeplaine,  '  when  my  water  carrier  is  at  the 
door,  would  he  be  guilty  of  stellionate  (selling  property  one  does  not  own  or 
selling  the  same  property  to  two  different  parties)  if  he  sold  me  two  casks 
of  water  instead  of  only  one,  which  he  has? '  '  Certainly  not,  because  he  is 
always  sure  of  finding  in  the  river  what  he  lacks.'  '  Well,  Your  Majesty, 
there  is  on  the  Bourse  a  river  of  rentes.'"  (Memorial  of  the  stockbrokers 
addressed  to  the  Minister  of  Finance,  1843,  p.  44,  footnote.) 


46 


History    and   Methods   of  the   Paris    Bourse 

striking  a    balance  will    show-  him    creditor  or  debtor, 
owing  to  the  balancing  of  his  debit  with  his  credit.0 

Instance :  Settling  account  of  Peter,  who  had  purchased 
100  shares  at  100  francs,  which  he  resold  at  no  francs: 

Dr.  Cr. 

Francs.  Francs. 

ioo  shares  at  ioo  francs 10,000     100  shares  at  no  francs n,ooo 

Credit  balance..  .__     1,000 


11,000  11,000 

Profit,  1,000  francs. 

(24)  Operations  for  future  delivery  give  rise  to  ''re- 
ports "  ( "  carrying-over ' '  operations,  ' '  continuations  ") . 
It  is  in  place  here  succinctly  to  explain  their  object  and 
mechanism. 

Object. — Let  us  suppose,  in  the  instance  above  men- 
tioned, that  Peter,  buyer  for  the  i5th  instant  of  ioo 
shares  at  ioo  francs,  wishes,  when  the  i5th  arrives,  to 
extend  his  maturity  until  the  3oth  of  the  month. 

Mechanism. — On  that  same  day,  the  isth  instant,  he 
will  resell  the  securities  at  a  special  price,  called  "  cours  de 
compensation"  (making-up  price  or  clearing  price6),  and 
will  rebuy,  at  the  same  time,  for  the  end-of-the-month 
maturity  at  the  same  making-up  price,  increased  by  an 
amount  called  "  prix  du  report"  (cost  of  carrying  over, 
''contango")-  Let  us  suppose  that  no  francs  is  the 
making-up  price,  and  that  the  cost  of  carrying  over  is  i 
franc.  You  find  below  the  transaction  on  two  accounts. 

Let  us  first  give  the  first  account. 

o  Articles  1289  and  1290  of  the  Code  civil. 

&The  clearing  price  is  an  accounting  process  with  a  view  to  unifying 
"carrying-over"  operations.  It  is  fixed  by  an  agreement  in  the  public 
market.  The  syndical  chambers  fixes  that  rate. 


47 


National    Monetary     Commissio 


n 


Peter,  his  settlement  account  for  the  i5th  instant: 

Dr.  Cr. 

Francs.  Francs. 

i oo  shares  at  i oo  francs 10,  ooo  100    shares    at    no    francs 

Credit  balance 1,000  (clearing  price) 11,000 


1 1 ,  ooo  1 1 ,  ooo 

Profit,  i, ooo  francs. 

Now,  this  is  the  second  account  for  the  end  of  the  month. 
Peter,  his  settlement  account  for  the  end  of  the  month : 

Dr.  Cr. 

Francs.  Francs. 

i  oo  shares  at  n  i  francs  (i  i  o  Sales None. 

francs  plus  i) 11,100 

The  two  accounts  are  thus  established:  One,  which  in- 
cludes a  settled  transaction,  showing  the  operator  as 
creditor  or  debtor,  as  the  case  may  be,  for  an  amount  to 
collect  or  to  pay;  the  other,  showing  a  new  operation, 
which,  at  the  following  settlement,  will  be  the  object  of  a 
liquidation — that  is  to  say,  another  winding  up,  either  by 
taking  up  or  reselling  the  securities,  or  by  a  new  "report " 
(continuation).  The  continuation  has,  therefore,  the 
same  result  as  a  renewal  of  maturity. 

Capitalists  wishing  to  make  temporary  investments  put 
their  money  out  in  "reports"  (loans  for  carrying  over, 
investments  in  continuations) .  On  settling  day  they  pur- 
chase, on  the  stock  exchange,  securities  from  buyers 
who  desire  to  prolong  their  operations;  they  resell  them 
to  the  same  parties  for  the  next  maturity  at  the  clearing 
price  increased  by  the  price  of  carrying  over  (contango). 

On  settling  day  these  operations  are  easy,  owing  to  the 
abundance  of  funds  available  for  continuations  (capitaux 
reporteurs).  If  there  is  no  superabundance  of  funds,  and 
if  the  engagements  for  a  rise  (engagements  h  la  hausse) 
are  not  very  numerous,  continuations  are  cheap. 

48 


History   and   Methods    of  the   Paris   Bourse 

If  money  is  plentiful  and  purchases  are  few,  continua- 
tions are  at  par. 

In  case  securities  are  wanting  in  comparison  with  the 
money  available,  the  sellers  will  pay  a  premium  in  order 
not  to  make  deliveries;  this  is  called  "deport"  (back- 
wardation) . 

For  instance:  Peter,  seller  of  100  shares  at  100,  finds 
himself  unable  to  effect  a  delivery.  He  will  pay,  for 
instance,  i  franc  per  share  for  "deport''  (backwardation), 
and  his  settling  account  will  carry  a  repurchase  at  the 
clearing  price  (cours  de  compensation).  His  account  at 
the  following  maturity  will  carry  a  sale  at  the  clearing 
price,  less  i  franc. 

(25)  Some  operations  for  future  delivery  (a  terme)  are 
contracted  for  uncertain  dates,  though  the  maturity  is 
foreseen.     Such  are  transactions  in  securities  ' '  a  remission" 
("when  issued").     Speculators  undertake  to  deliver  an 
issue  of  securities  in  perspective — when  they  are  issued. 
Hence,  operations  "a  remission"  are  transactions  sub- 
ject to  settlement  at  a  time  when  certain  formalities  will 
have  been  accomplished,  and  in  a  place  where  the  delivery 
of  the  securities  will  be  actually  possible. 

Some  emissions  of  securities  are  subject  to  reductions  in 
the  allotments  when  the  subscription  lists  are  closed. 
That  phenomenon  gives  rise  to  special  operations  called 
"ventes  de  resultats"  (sales  of  percentage  of  securities 
obtained,  or  sale  of  allotments).  One  can  sell,  or  pur- 
chase, the  results  of  subscriptions  for  3,000  francs  rentes, 
for  instance,  or  100  shares,  etc. 

(26)  Among  operations  for  future  delivery  there  are 
special  ones  called  "  operations  a  prime  "  (options).     These 


49 


National    Monetary     Commission 

are  purchases  concerning  which  the  purchaser  reserves 
for  himself  the  right  to  abandon  the  trade,  in  considera- 
tion of  a  certain  sum  fixed  in  advance.  For  instance, 
Peter  buys  for  the  i5th  instant  100  shares  at  120  francs 
"dont"  5  francs.a  The  transaction  is  entered  as  120/5. 
At  a  time  fixed  during  the  settling  operations,  called 
"reponse  des  primes"  (option  declaration) — this  is  the 
session  preceding  the  day  devoted  to  "contango"  opera- 
tions (reports) — Peter  must  announce  whether  he  will  take 
up  the  stock  at  120,  or  whether  he  abandons  the  trade, 
by  giving  up  5  francs  for  each  share  to  the  seller. 

As  a  rule,  the  prices  for  transactions  in  options  are  as 
much  higher  as  the  premium  to  be  forfeited  is  smaller. 
Instance:  A  stock  is  worth  100  on  the  average.  Let  us 
suppose  the  rate  is  120  francs  " dont "5;  then  we  can  take 
the  rate  as  125  francs  "dont"  2.50;  also  we  can  take  it  as 
127  francs  "dont"  i. 

There  is  no  absolute  rule  for  these  differences,  the 
same  as  there  is  no  absolute  rule  for  prices  in  a  general 
way.  Offers  and  bids  cause  the  variations. 

The  maturity  also  plays  a  part  in  the  option  prices. 
Thus  a  transaction  in  options  maturing  in  a  month  or  six 
weeks  or  two  months  costs  more  than  an  option  at  a 
nearer  date. 

It  is  thought  that  transactions  in  options  have  been 
carried  on  in  France  from  the  time  of  a  special  operation 
made  by  George  Law  in  1718,  in  order  to  make  an  impres- 
sion on  people,  and  foster  purchases  of  shares  in  his  bank. 

a  The  expression  "dont"  serves  to  indicate  the  sum  to  be  forfeited.  It 
implies  the  undertaking  thus  expressed.  Peter  buys  securities  at  120 
francs,  "dont"  (of  which)  he  shall  forfeit  5  francs  if  he  does  not  take  up  the 
securities. 


History   and   Methods   of  the   Paris    Bourse 

He  bought  200  shares  deliverable  in  six  months  for  an 
amount  greater  by  40,000  livres  than  the  price  they  were 
worth  then  (300  livres) — it  being  understood  that  if,  after 
six  months,  the  shares  were  not  worth  500  livres,  he  would 
forfeit  the  40,000  livres  to  his  seller.  This  was  a  real 
option  transaction,  and  by  entering  upon  such  a  contract, 
Law  confirmed  his  faith  in  the  rise  of  his  shares.  Numer- 
ous purchases  by  the  public  then  took  place.  (See 
Edmond  Guillard,  Operations  de  Bourse,  p.  24.) 

(27)  Option  transactions  give  rise  to  manifold  combi- 
nations at  the  pleasure  of  the  operator.  We  shall  name 
the  principal  ones:  [a]  "operations  a  primes  isolees" 
4(plain  options);  [b]  "operations  a  prime  contre  ferme" 
(operations  of  "option  against  non-option") ;  [c]  "opera- 
tions ferme  contre  prime"  ( " non-option  against  option") ; 
[d]  operations  a  prime  contre  prime"  ("option  against 
option  "). 

[a]  Plain  options. — The  plain  option  (operation  a  prime 

isolee)  is  the  option  transaction  in  its  simplest  form. 
Thus  a  capitalist  or  a  speculator  wants  to  buy  stocks,  but 
fears  a  decline,  and  prefers,  in  case  the  fall  should  be  too 
severe,  to  reserve  for  himself  the  right  to  forego  the  trade, 
in  return  for  a  small  sum.  He  will  purchase,  as  we  saw 
in  the  above  instance,  by  supposition,  at  120/5. 

By  keeping  to  that  supposition,  the  following  will 
happen:  Just  as  it  may  be  to  the  advantage  of  that  pur- 
chaser to  forego  his  trade  at  the  cost  of  5  francs  for  each 
share,  so,  on  the  other  hand,  his  advantage  may  demand 
that  he.  carry  out  his  contract.  In  the  latter  case,  as 
already  stated,  his  transaction  will  be  a  fixed  transaction 
(operation  ferme) . 


National    Monetary     Commission 

Below  you  will  find  two  instances  illustrated  by  an 
account. 

Instance  of  a  transaction  when  the  option  is  abandoned. 
The  rate  at  the  option  declaration  having  been,  let  us 
suppose,  1 1 4  francs : 

Peter,  his  settling  account  on  the  i5th  instant. 


Dr. 


Francs. 


Cr. 


Francs. 


Sales Nil. 

Balance  due 500 


i oo  shares  at  120/5 Nil. 

Option  abandoned 500 

Loss,  500  francs. 

On  the  other  hand,  if  we  take  for  granted  that  the  quo- 
tation at  the  option  declaration  was  such  that  Peter  found 
it  advantageous  tp  carry  out  the  transaction,  he  becomes 
a  non-optional  buyer.  Naturally,  he  may  take  up  his 
securities,  resell  them,  or  have  them  carried  over — this 
goes  without  saying.  Having,  indeed,  become  fixed,  the 
transaction  will  be  governed  by  the  general  principles 
enumerated  above  for  fixed  transactions.  Such  is  the 
second  case.  Let  us  dwell  upon  it  one  moment  more,  in 
order  to  see  the  effect  that  a  subsequent  fixed  sale  will 
have  on  an  account. 

If  we  suppose  the  transaction  on  option  carried  out  and 
wound  up  by  a  sale  at  a  price  which  we  will  suppose  to  be 
130  francs,a  Peter's  account  will  be  made  out  as  follows: 

Peter,  his  settling  account  on  the  i5th  instant. 


Dr. 


Francs. 


100  shares  at  120/5 12,000 

Credit  balance  _ .  i ,  ooo 


Profit,  1,000  francs. 


13,000 


Cr. 


Francs. 


100  shares  at  130 13,000 


13,000 


« The  price  of  130  is  hypothetical.  Let  us  remark  that,  provided  the 
price  is  above  115,  our  option  purchaser  finds  his  advantage  in  selling,  even 
if  the  price  is  below  120,  and  he,  consequently,  sells  at  a  loss. 

52 


History    and   Methods   of  the   Paris    Bourse 

Thus,  during  the  half  month,  the  option  operator  has 
had  the  opportunity  to  sell  non-op tionally  (ferme),  if 
events  led  to  an  advantageous  transaction. 

The  above  transaction  illustrates  a  fixed  sale  taking 
place  after  a  purchase  on  option.  But,  instead  of  a  fixed 
sale,  a  sale  on  option  may  be  made.  In  that  case,  the 
transaction  becomes  a  combination  of  option  against 
option,  which  we  shall  investigate  later  in  the  combi- 
nation [d]. 

We  shall  now  proceed  with  the  investigation  of  sale  on 
simple  option. 

It  has  been  said  that  " option"  is  a  purchase  which  the 
purchaser  could  abandon.  The  case  can  not  be  reversed. 
The  seller  on  option  can  not  waive  the  contract;  he  is 
bound  to  the  buyer. 

The  sale  on  " simple  option"  is  suitable  to  the  holder 
of  securities  who,  in  order  to  sell  better,  desires  to  take 
advantage  of  the  difference  existing  between  the  rates  of 
fixed  transactions  and  the  rates  for  options.  For  instance: 
A  security  is  quoted  "ferme"  (without  option)  100,  the 
price  of  options  is  120/5.  Peter  sells  100  shares  at  120/5. 
If  the  purchase  is  taken  up  by  the  buyer,  Peter  has  indeed 
sold  profitably,  since  he  sold  his  securities  at  120,  while 
they  were  worth  100  "ferme."  If  the  purchase  is  aban- 
doned, Peter  keeps  his  securities,  but  the  500  francs  pre- 
mium which  he  collects,  reduce,  relieve,  allay  the  loss 
which  he  experiences  on  the  securities  he  owns. 

Options  therefore  are  not,  as  superficial  minds  formerly 
stated,  a  gambling  operation. 

The  gambler  is  bold.  On  the  other  hand,  the  one  who 
guards  himself  when  he  buys,  the  one  who  limits  his  loss 


53 


National     Monetary     Commission 

beforehand,  like  the  one  who,  when  selling,  insures  himself 
against  danger,  manages  his  property  and  acts  cautiously. 

(28)  [b]  Transactions  at  "option  against  non-option'' 
(prime  contre  ferme) — We  saw  in  the  preceding  instance 
a  purchaser  of  options  who  made  a  fixed  sale  some  time 
after  his  purchase.  The  combination,  linked  in  some  way, 
may  be  planned  and  carried  out  within  a  very  short  time, 
the  same  day,  almost  at  the  same  moment.  The  operator 
devises  the  transactions  simultaneously. 

Let  us  imagine,  therefore,  that  Peter  buys  100  shares 
for  the  1 5th  instant  at  120/5,  and  that  simultaneously  he 
makes  a  fixed  sale  at  100  francs. 

Peter  has  at  once  registered  a  paper  loss — the  differ- 
ence between  120  and  100,  that  is  to  say,  20  francs  per 
share.  But  if  a  heavy  decline  occurs,  and  if  the  purchase 
on  option  is  abandoned  on  the  day  of  option  declarations, 
Peter  will  find  himself  in  the  position  of  a  speculator  for  a 
fall  (bear) ,  who  sees  the  expected  phenomenon  happening, 
and  who  has  limited  his  possible  loss  in  case  of  a  rise. 

Below  you  will  find  the  supposed  outcome  of  the  exer- 
cising and  of  the  abandoning  of  the  purchased  option. 

L,et  us  take  for  granted  that,  on  the  day  of  option 
declaration,  the  option  is  exercised.  The  statement  ap-. 
pears  as  follows: 

Peter,  his  settling  account  on  the  i5th  instant. 


Dr. 

Purchases.  Francs. 

100  shares  at  1 20/5 12,  ooo 


12,000 


Cr. 

Sales.  Francs. 

100  shares  at  100 10,000 

Debit  balance 2,000 


12,000 


Loss,  2,000  francs. 


54 


History   and    Methods   of  the   Paris   Bourse 

On  the  other  hand,  the  decline  may  have  occurred  to 
such  an  extent  that  Peter  found  it  advantageous  to 
abandon  his  trade  at  120/5,  and  to  repurchase  "ferme" 
(non-optionally) ;  let  us  then  imagine  a  rate  of  re- 
purchase of  80  francs,  for  instance.  The  account  of 
Peter  will  be  as  follows: 

Peter,  his  settling  account  on  the  i5th  instant. 

Dr. 

Purchases.  Francs. 

ioo  shares  at  1 20/5 Nil. 

Option  abandoned 500 

ioo  shares  at  80 8,000 

Credit  balance 1,500 


10,  ooo 


Cr. 

Sales.  Francs, 

ioo  shares  at  ioo 10,000 


10,000 


Profit,  1,500  francs. 


The  combination  of  " option  against  non-option"  with 
regard  to  the  speculator  for  a  fall  (bear)  is  based  on  a  desire 
to  limit  his  loss  by  insuring  him  against  a  rise,  without  limit- 
ing his  profit.  For  the  holder  of  securities,  the  combi- 
nation permits  the  party  who  sold,  and  may  be  led  to  regret 
his  sale  on  account  of  a  very  high  ulterior  rise,  to  accept  a 
loss,  but  to  keep  his  securities  in  order  to  sell  them  more 
advantageously,  if  the  opportunity  presents  itself. 

(29)  [c]  The  operation  "  non-option  against  option  "  (ferme 
contre  prime) — This  operation  tends  to  cover  and  to  limit 
the  risk  of  a  fixed  purchase. 

A  non-optional  purchaser  is  indeed  exposed  to  a  decline 
without  limit.  Peter  bought  ioo  shares  at  ioo  francs 
for  10,000  francs.  If  his  shares  decline  to  90,  80,  70,  etc., 
he  loses  on  them  i  ,000,  2,000,  3,000  francs. 

In  order  to  diminish  his  possible  loss,  or  because  he 
estimates  that  the  rise,  if  it  occurs,  is  not  likely  to  amount 


55 


National    Monetary     Commission 

to   much,   our   non-optional   purchaser,   who   may  have 
bought  100  shares  at  100  francs,  will,  let  us  say,  sell  on 
option   100  shares  at   120/5.     His  account,   in  case  the 
option  is  exercised,  will  then  be  as  follows: 
Peter,  his  settling  account  for  i5th  instant: 


Dr. 

Purchases.  Francs. 

ioo  shares  at  ioo 10,000 

Credit  balance 2,000 


12,000 


Cr. 

Sales.  Francs, 

ioo  shares  at  120/5 12,000 


12,000 


Profit,  2,000  francs. 

On  the  other  hand,  if  the  option  were  abandoned,  Peter 
would  face  a  fixed  purchase;  and  if  he  should  wind  it  up 
later  by  means  of  a  sale  at  90  francs,  for  instance,  the 
account  would  appear  as  follows: 

Peter,  his  settling  account  on  the  15th  instant: 

Dr.  Cr. 

Purchases.                                         Francs.         Sales.  Francs 

ioo  shares  at  ioo 10,000     ioo  shares  at  120/5 Nil. 

Option  abandoned 500 

ioo  shares  at  90 9,000 

Debit  balance 500 


10, ooo 


10,  ooo 


I/oss,  500  francs. 

Peter  has,  therefore,  diminished  his  loss  by  500  francs. 
Indeed,  if  he  had  purchased  non-optionally  at  ioo  francs, 
without  protecting  himself  by  an  option,  he  would  have 
lost  i, ooo  francs  when  he  resold 'at  90.  On  the  contrary, 
having  protected  himself  by  the  sale  of  a  call,  he  saved 
500  francs  on  the  loss  he  experienced. 

(30)  [d]  Operations  in  "option  against  -option"  (prime 
contre  prime) — If  the  fact  is  borne  in  mind  that  quotations 
for  transactions  in  options  are  as  much  higher  as  the  costs 
of  the  options  are  smaller,  that  difference  of  prices  may  be 
utilized  through  a  combination. 

56 


History    and    Methods   of  the  Paris   Bourse 


Let  us,  therefore,  imagine  that  a  purchaser  of  100 
shares  at  120/5  f°r  the  i5th  instant  resells  them  at 
125/2.50  for  the  same  date,  and  let  us  see  how  the 
account  will  show,  in  case  the  options  are  exercised,  and 
in  case  they  are  abandoned. 

If  the  options  are  exercised,  the  account  is  as  follows: 
Peter,  his  settling  account  for  the  i5th  instant: 


Dr. 

Purchases.  Francs. 

100  shares  at  1 20/5 12,  ooo 

Credit  balance 500 


12,500 


Cr. 

Sales.  Francs. 

100  shares  at  125 12,500 


12,500 


Profit,  500  francs. 

If  the  options  are  abandoned,  the  account  is  as  follows: 
Peter,  his  settling  account  for  the  i5th  instant: 


Dr. 

Purchases. 

100  shares  at  120/5. 
Option  abandoned  _ 


Francs. 
Nil. 
500 


500 


Cr. 
Sales. 
ioo  shares  at  125/2.50. 

Option  abandoned 

Debit  balance  _  _ 


Francs. 
Nil. 
250 
250 

500 


Loss  ,  250  francs. 

This  combination  tends  to  limit  either  the  profit  or 
the  loss. 

It  may  happen  that  one  option  will  be  abandoned 
and  the  other  taken  up.  For  instance,  the  rate  at  the 
option  declaration  is  121  francs.  The  "call"  he  pur- 
chased will  be  exercised,  while  the  "call"  he  sold  will  be 
abandoned.  In  this  case,  Peter  becomes  the  non-optional 
purchaser  of  ioo  shares  at  120  francs,  and  his  purchase 
price  is  lowered  by  the  amount  of  the  premium  he  has 
received. 

(31)  Therefore:  [i]  The  "plain  option"  (b,  prime 
isolee)  suits  the  purchaser  wishing  to  limit  his  loss,%  as 


57 


National    Monetary     Commission 

well  as  the  capitalist,  the  holder  of  securities,  who,  by 
becoming  a  seller  of  options,  wishes  to  lessen  the  lower 
value  he  may  have  to  stand. 

[2]  The  operation  of  "option  against  non-option" 
(prime  contre  ferme)  suits  the  capitalist,  the  holder  of 
securities,  who,  having  sold  them,  resolves  to  pay  a 
difference  in  order  to  sell  more  advantageously  at  a  later 
date.  It  suits  also  the  "short  seller"  who  wishes  to 
secure  himself  against  an  excessive  rise.  It  limits  his 
loss  without  limiting  his  possible  profit. 

[3]  The  operation  " non-option  against  option"  (ferme 
contre  prime)  suits  the  purchaser  who  wishes  to  reduce 
his  possible  loss.  It  fixes  the  profit  without  limiting 
the  loss,  but  lessens  the  latter  by  the  amount  of  the 
premium. 

Finally,  [4]  the  operation  of  "option  against  option" 
(prime  contre  prime)  suits  the  speculator  wishing  to  limit 
both  the  eventual  profit  and  the  eventual  loss. 

No  doubt,  there  are  other  combinations,  such  as  the 
fixed  sale  of  a  certain  amount  against  a  purchase  on  option 
for  double  the  quantity  (operation  called  h  cheval,  "strad- 
dle") ;  such  are  purchases  and  sales  of  options  at  different 
dates,  notably  "the  scale "  (I'echelle),  an  operation  through 
which  a  purchaser  sells  an  option  for  the  present  account, 
and  at  the  same  time  buys  another  option  for  the  follow- 
ing account.  All  these  combinations  are  the  result  of 
reflection  and  are  suggested  by  events. 

There  is,  however,  one  special  operation  in  options  which 
is  of  interest — namely,  the  "stellage"  (spread);  we  intend 
to  describe  and  explain  its  working,  although  it  is  but 
little  used. 


History   and   Methods   of  the   Paris   Bourse 

(32)  The  "stellage"  is  an  operation  through  which  a 
party,  called  buyer  of  the  "stellage"  (spread),  must  at  a 
certain  date  declare  whether  he  is  buyer  or  seller  of  a 
certain  amount  of  stocks,  as  against  another  party  to  the 
contract,  called  seller  of  the  "stellage."  This  operation  is 
but  the  synthesis  of  two  supposititious  operations,  which 
present  themselves,  in  the  case  of  the  purchaser  of  the 
"stellage,"  as  a  purchase  on  option  of  a  certain  amount  of 
securities  against  a  non-optional  sale  of  half  that  amount, 
and,  in  the  case  of  the  seller  of  the  "stellage,"  on  the  con- 
trary, as  a  sale  on  option  of  a  certain  amount  of  securities 
against  a  non-optional  purchase  of  half  that  amount. 

For  instance,  a  stock  is  quoted  for  the  account  of  the 
1 5th,  100  francs,  while  the  option  at  5  francs  ("dont"  5 
francs)  for  the  same  maturity  is  quoted  1 20.  If  Peter  pur- 
chases the  "  call"  of  100  shares  at  120/5  against  the  non- 
optional  sale  of  50  shares  at  100  francs,  he  would,  in 
case  he  decided  to  exercise  his  right  at  the  time  of  option 
declaration,  appear  as  a  purchaser  at  a  cost  price  which 
would  be  140  francs.  But  in  case  he  should  abandon  the 
option,  the  selling  price,  lessened  by  the  premium  of  5 
francs  per  share  abandoned  on  the  side  of  the  purchaser, 
would  amount  to  90  francs. 

Indeed,  let  us  imagine  an  account  in  which  Peter  is 
buyer  of  100  shares  at  120/5,  and  seller  of  50  shares  at 
100.  He  exercises  the  option,  and  in  the  result  he  becomes 
a  buyer  of  50  shares.  In  figures,  he  comes  out  a  debtor 
for  7,000  francs.  The  50  shares  cost  him,  therefore,  140 
francs  each  (7,000  :  50  =  140). 

If  he  abandons  the  option,  he  comes  out  as  a  seller  of 
50  shares.  The  price  of  his  sale  (5,000  francs)  is  lessened 


59 


National     Monetary     Commission 

by  the  amount  of  the  premium  of  500  francs  he  owes.  He 
will  therefore  be  a  seller  at  90  francs  (4,500  :  50  =  90). 

If,  now,  instead  of  buying  the  "  call  "of  100  shares  120/5 
against  the  non-optional  (ferme)  sale  of  50  shares  at  100, 
Peter  buys  a  "stellage"  (spread)  at  a  price  expressed  as 
follows:  140/90,  he  will  have  the  privilege  of  becoming 
a  purchaser  of  a  number  of  shares  at  140  francs;  but  at 
the  latest,  on  the  day  of  option  declaration,  he  will  have 
to  declare  himself  either  purchaser  or  seller. 

In  case  of  a  great  advance  or  heavy  decline,  Peter,  as 
buyer  of ' '  put ' '  and  ' '  call , ' '  is  sure  of  a  profit .  At  the  price 
of  140  francs  and  above,  he  becomes  buyer — he  "  calls."  At 
the  price  of  90  francs  and  below,  he  becomes  seller — he 
"puts." 

But  let  quotations  stand  still,  the  variations  remaining 
at  a  figure  between  140  francs  and  90  francs,  and  Peter 
will  be  loser.  That  loss,  however,  in  the  present  case 
would  be,  at  most,  25  francs  per  share.  The  loss,  indeed, 
can  not  exceed  for  each  share  one-half  of  the  difference 
between  the  figures  of  the  ' '  put ' '  and  ' '  call "  ( 1 40  —  90  =  50 ; 
50:2  =  25). 

Indeed,  if  on  the  day  of  option  declaration  90  is  quoted, 
Peter,  who  is  bound  to  declare  himself,  will  certainly  not 
"call"  at  140  for  stock  which  he  can  resell  only  at  about 
90.  He  will  declare  himself  seller,  and  the  rates  at  the 
declaration  will  leave  him  neither  gainer  nor  loser. 
Seller  at  90,  buyer  at  90,  his  account  balances,  without 
gain  or  loss. 


60 


History   and   Methods   of  the   Paris    Bourse 

But  if  the  price  is  91  francs,  he  will  declare  himself  seller 
and — 

will  lose  i  franc  on  each  share; 

if  92  francs,  he  will  lose  2  francs  on  each  share; 

if  93  francs,  he  will  lose  3  francs  on  each  share; 

if  94  francs,  he  will  lose  4  francs  on  each  share; 

if  95  francs,  he  will  lose  5  francs  on  each  share; 

and  so  on.     As  the  price  at  the  declaration  of  options  rises 

above  90  francs,  Peter  will  find  it  to  his  interest  to  "put" 

at  that  price  rather  than  "call,"  and  yet  he  will  be  loser. 

Thus,  at  a  price  at  the  option  declaration  of  115,  Peter, 

declaring  himself  seller  at  90,  will  lose  a  difference  of  25 

francs  on  each  share. 

However,  it  should  be  noted  that  when  the  price  at 
option  declaration  is  115  francs,  Peter  might  just  as  well 
declare  himself  purchaser  at  140  francs  as  seller  at  90 
francs.  Indeed,  if  he  becomes  purchaser  at  140  and  he 
resells  at  the  price  of  the  option  declaration,  115,  he  will 
lose  25  francs  on  each  share,  as  in  the  other  case. 

Above  1 1 5  francs  it  will  be  to  Peter's  advantage  not  to 
exercise  the  "put,"  but  to  "call;"  that  is,  to  purchase 
rather  than  sell. 

Indeed,  if  the  quotation  is  1 16  francs,  then,  by  becoming 
purchaser  at  140,— 

he  will  lose  24  francs  on  each  share; 
if  117,  he  will  lose  23  francs  on  each  share; 
if  1 1 8,  he  will  lose  22  francs  on  each  share; 
if  119,  he  will  lose  21  francs  on  each  share; 
if  1 20,  he  will  lose  20  francs  on  each  share. 


61 


National    Monetary     Commission 

The  nearer  the  rate  of  the  option  declaration  rises 
toward  140,  the  less  will  the  loss  become.  At  140,  Peter 
will  experience  no  loss;  above  that  rate,  profit  will  begin. 

Thus  the  two  ends  of  a  "stellage"  (put  and  call)  pre- 
sent an  ascending  and  descending  scale  of  losses,  the 
apex  of  which  will  be  the  average  rate  between  the  two 
extreme  limits.  That  average  rate  will  determine  the 
maximum  loss  to  which  the  buyer  of  a  "stellage"  may  be 
subjected. 

It  remains  for  us  to  look  into  the  position  of  Paul,  seller 
of  the  "stellage. " 

At  every  intermediate  rate,  between  140  and  90,  he 
will  have  a  profit  in  the  same  proportion  as  Peter  will 
experience  a  loss.  But,  in  case  of  a  considerable  rise  or 
fall,  his  loss  is  limited  only  by  the  limit  of  the  fluctua- 
tions. Above  140,  he  runs  the  risk  of  being  called  upon 
to  take  up  delivery  at  that  price;  he  is  also  exposed,  if  the 
shares  fall  below  90,  to  have  to  deliver  them  at  that  price. 
Peter,  buyer  of  the  "spread,"  has  in  his  favor  the  big 
bourse  fluctuations,  and  against  him  their  slight  varia- 
tions, while  Paul,  seller  of  the  "spread,"  has  in  his  favor 
the  comparative  stagnation  of  prices,  and  against  him  the 
great  fluctuations.0 

(33)  How  are  the  accounts  liquidated?  To  liquidate 
is  to  audit,  to  settle.  The  purchaser  who  exercises  his 
"call"  liquidates  through  the  "call." 

In  the  same  way  for  the  seller  who  "puts." 

The  purchaser  who  has  resold,  has  liquidated  his  trans- 
action. But  that  operation,  like  the  one  of  the  seller 

a  Yves  Guyot  &  Raffalovitch,  "  Dictionnaire  du  Commerce,  de  I' Industrie 
et  de  la  Banque,"  under  the  word  "stellage,"  by  Emmanuel  Vidal. 


62 


History    and   Methods    of  the   Paris    Bourse 

who  rebuys,  only  shows  liquidation  when  the  accounts 
have  been  established.  The  same  applies  to  the  party 
who  loans  money  for  the  account,  and  the  party  who 
borrows  for  the  account. 

Parties  dealing  between  themselves  on  the  Bourse — 
stockbrokers  between  themselves,  bankers  between  them- 
selves— fix  a  time,  called  "declaration  of  options,"  when 
they  declare  what  they  decide  to  do.  One  day  later  the 
liquidation  proper  begins. 

Purchasers  who  do  not  care  to  exercise  their  "call," 
resell  or  have  their  purchases  carried  over  until  the 
next  settlement;  sellers  who  do  not  wish  to  deliver,  rebuy 
or  carry  over. 

After  that,  in  a  common  office,  the  work  of  central 
liquidation  begins. 

(34)  To  understand  the  machinery,  it  is  proper  to  recall 
that  the  "  making-up  "  price  is  a  price  fixed  by  agreement, 
intended  to  facilitate  deliveries  and  settlement  on  the 
bourses  and  markets. 

With  this  in  mind,  we  shall  suppose  five  people — Peter, 
Paul,  Jack,  Will,  and  Ernst,  operating  on  a  hypothetical 
market. 

Peter  sold  on  the  Bourse  100  shares  to  Paul,  at  100 
francs — that  is  to  say,  for  10,000  francs — Paul  resold 
them  to  Jack  at  101,  for  10,100  francs;  Jack  resold  them 
to  Will  at  102,  for  10,200  francs;  Will  resold  them 
to  Ernst  at  103,  for  10,300  francs.  What  happens  at 
maturity  in  case  there  is  no  clearing? 

Peter  delivers  the  100  shares  to  Paul,  the  latter  paying 
him  10,000  francs.  Paul,  holding  these  100  shares, 
brings  them  to  Jack,  who  pays  for  them  10,100  francs; 

90312°— 10 '5  63 


National     Monetary     Commission 

Jack  calls  on  Will,  hands  him  the  100  shares,  and  collects 
10,200  francs;  finally,  Will  betakes  himself  to  Ernst, 
who  disburses  10,300  francs  and  keeps  the  securities. 

This  causes  considerable  disturbance  to  many  people, 
numerous  bookings,  carrying  around  of  funds  and  carry- 
ing  around  of  securities. 

The  clearing  system,  otherwise  called  the  central  liqui- 
dation service,  has  for  its  object  the  obviating  of  all 
these  disadvantages. 

It  works  as  follows:  Peter,  Paul,  Jack,  Will,  and  Ernst 
are  requested  by  the  chief  of  the  common  service  called 
central  liquidation,  to  settle  all  their  engagements  at  a 
rate  called  clearing  price  (cours  de  compensation} ,  fixed,  let 
us  say,  at  101.50. 

Thanks  to  this  service  there  will  be  no  successive  deliv- 
eries of  securities  to  Paul,  Jack,  and  Will.  The  delivery 
of  securities  will  be  made  from  Peter  to  Ernst  exclusively, 
passing  by  Paul,  Jack,  and  Will. 

The  liquidation  then  centralizes  the  deliveries  of  secu- 
rities between  sellers  and  purchasers.  Moreover,  it  can 
also  collect  differences  due  from  the  debtors,  and  pay  the 
creditors,  while  attending  to  the  handling  of  the  securities. 

The  account  of  each  party  results  as  follows:  Peter 
sold  100  shares  to  Paul,  and  delivers  them  to  Ernst  on 
the  indications  of  the  central  liquidation,  at  the  clear- 
ing price,  101.50.  He  is  credited  with  10,000  francs, 
selling  price  to  Paul,  and  debited  with  10,150  francs, 
"making-up  "  price — giving  a  balance  of  150  francs  to  his 
debit. 


64 


History   and   Methods   of  the   Paris    Bourse 

The  accounts  of  Paul,  Jack,  and  Will,  will  be  as  follows: 

Paul's  account. 


Dr. 

Francs. 

Purchased  of  Peter  at  ioo__    10,  ooo 
Cleared  at  101.50 10,150 


20,  105 


Cr. 


Francs. 


Cleared  at  101.50 10,  150 

Sold  to  Jack  at  10 1 10,  100 


Result:  A  balance  in  favor  of  Paul  of  100  francs." 


Jack's  account. 


Dr. 


Francs. 

Purchased  of  Paul  atioi__    10,100 
Cleared  at  101.50 10,150 


20,  250 


Cr. 


20,  250 


Francs. 


Cleared  at  101.50 10,150 

Sold  to  Will  at  102 ib,  200 


Result:  A  balance  in  favor  of  Jack  of  100  francs. 
Will's  account. 


Dr. 


Francs. 


Purchased  of  Jack  at  102  __    10,  200 
Cleared  at   101.50 10,150 


20,350 


Cr. 


20,  350 


Francs. 


Cleared  at  101.50 10,  150 

Sold  to  Ernst  at  103 10,  300 


20,  450 


Result:  A  balance  in  favor  of  Will  of  100  francs. 

Finally,  Ernst  disburses  10,150  when  taking  up  the 
securities  of  Peter. 

He  bought  from  Will  at  103,  owing  10,300  francs,  and 
the  clearing  takes  place  at  101.50,  totaling  10,150  francs. 
He,  therefore,  still  owes  1 50  francs  on  the  purchase  price. 

a  The  two  clearings  at  101.50  appear  in  the  account.  As  they  are  even 
in  the  debit  and  the  credit,  they  could,  they  even  ought,  for  the  sake  of  good 
accounting,  be  taken  off  the  account;  but  we  let  them  remain,  in  order  to 
show  all  that  happens  within  the  central  liquidation  office.  Paul  has 
purchased  securities  for  a  sum  of  10,000  francs,  which  he  owes;  he  de- 
livers the  securities  to  the  central  liquidation  and  receives  10,150  francs. 
He  is  credited  for  it.  He  sold  the  shares  at  101,  for  10,100  francs.  He 
purchases  them  at  the  central  liquidation  at  the  clearing  price,  and  pays 
over  10, 150.  He  is  debited  for  it.  The  same  applies  to  the  other  accounts. 


National    Monetary     Commission 


Hence,  the  situation  in  the  central  liquidation  office  will 
appear  as  follows: 


DEBTORS. 


Peter, 
Ernst. 


Francs. 
--  150 
--  150 


CREDITORS. 

Francs. 

Paul 100 

Jack ioo 

Will..  .   ioo 


300  300 

With  the  300  francs  which  Peter  and  Ernst  pay,  the 
central  liquidation  office  pays  Paul,  Jack,  and  Will. 

The  clearing  price  has,  therefore,  served  the  following 
purposes:  (i)  To  facilitate,  through  the  central  liquida- 
tion, deliveries  between  dealers  in  a  public  market; 
(2)  to  permit  this  central  service  to  fulfill  the  functions 
of  collector  and  distributer  of  money. 

The  clearing  prices  are  also  used  for  the  "carrying- 
over"  operations  through  loans  to  the  next  settlement 
(reports) ;  they  also  facilitate  operations  of  parties  giving 
orders  through  different  houses. 

On  the  Paris  Bourse  the  clearing  price  is  fixed  on  the 
settling  day  by  the  syndic  of  the  stockbrokers  (syndic  des 
agents  de  change)  for  securities  officially  quoted;  and  by 
a  member  on  duty  in  the  Syndical  Chamber  of  Bankers 
dealing  in  securities  for  future  delivery,  for  securities  in 
the  open  market. 

(35)  In  order  to  give  the  above  remarks  a  practical 
import,  it  is  necessary  to  follow  the  transactions  from  the 
standpoint  of  the  party  who  gave  the  orders. 

How  are  orders  given?  How  long  do  they  remain  in 
force?  How  can  they  be  controlled  by  the  quotation 
list?  On  what  conditions  are  orders  given  in  most 
cases?  How  can  certain  special  orders  in  small  options 


66 


History   and   Methods   of  the   Paris    Bourse 

be  followed  up  ?  Which  are  the  settling  days  ?  What  ex- 
penses is  the  party  who  gives  orders  subjected  to?  What 
happens  in  case  of  default,  either  on  the  part  of  the  party 
receiving  orders  or  the  party  giving  orders? 

For  securities  negotiated  in  the  official  market,  pur- 
chases and  sales  may  be  effected  either  at  the  opening 
price  or  the  closing  price,  at  a  fixed  price  or  at  best. 
Trading  at  the  average  rate,  like  trading  for  cash,  is  not 
done  without  previous  special  arrangements. 

But  just  as  in  the  trading  for  cash  stockbrokers  oper- 
ate before  the  opening  of  the  session  at  the  average  rate — 
that  is  to  say,  at  a  rate  unknown  at  the  moment  they  afe 
dealing,  but  which  will  be  determined  by  the  quotations 
entered  on  the  quotation  list — in  exactly  the  same  way 
these  ministerial  officeholders  deal  for  the  account,  on  the 
basis  of  the  opening  price,  before  it  becomes  known. 
Later,  when  business  opens,  the  first  price  entered  on 
the  official  list  will  determine  the  price  they  traded  at. 
This  mode  of  procedure  is  not  practised  in  the  bankers' 
market  (Coulisse). 

In  the  Coulisse  orders  are  given  at  a  fixed  price  or  at 
best  (an  mieux) .  One  may  also  indicate  the  moment  when 
his  order  is  to  be  executed — that  is  to  say,  at  the  opening 
of  the  session  or  at  the  closing  of  the  session. 

(36)  According  to  agreement,  orders  remain  in  force  for 
the  day,  for  a  week,  or  until  the  next  settlement,  inclusive. 
It  is  customary  for  stockbrokers  and  bankers  to  state  in 
their  letters  of  advice  that  orders  "<£  revocation"  (good 
until  canceled,  "g.  t.  c.")  remain  in  force  for  the  week, 
and  must  be  renewed  on  the  following  Monday,  for  want 
of  which  they  will  be  considered  as  lapsed. 


National    Monetary     Commission 

(37)  In  many  cases  the  accepting  of  orders  is  subor- 
dinate to  the  deposit  of  cover  (couverture) . 

The  cover  is  a  sum  deposited  by  the  buyer  as  an 
anticipated  payment  for  the  taking  up  of  securities 
to  be  bought,  or  for  the  difference  which  may  occur  by  a 
resale,  or  deposited  by  the  seller  to  safeguard  his  delivery 
or  pay  the  difference  in  case  of  repurchase.  When  it  is 
deposited  in  the  shape  of  securities  ''to  bearer"  (au  por- 
teur),  the  party  giving  the  order  must,  when  he  deposits 
the  securities,  sign  an  order  for  the  sale  of  same,  should 
it  be  necessary. 

The  stockbroker  or  banker  may  reserve  for  himself  the 
right  to  demand  additional  cover  (margin) ,  in  case  events 
should  render  the  original  amount  insufficient,  and,  for 
want  of  this  being  furnished,  the  right  to  close  out  the 
undertaken  transaction  for  the  account.  But  for  this 
purpose  a  distinct  stipulation  is  necessary. 

Especially  in  purchases  on  option  (a  prime) ,  the  interme- 
diary has  the  right  to  exact  that  an  additional  cover  be 
handed  to  him  on  the  day  of  option  declaration  (au  jour 
de  la  reponse),  for  the  event  in  which  the  option  should 
be  exercised  and  the  purchase  declared  a  fixed  bargain, 
and  that,  for  want  of  that  request  being  met  by  the 
party  giving  the  order,  the  transaction  be  closed  out  at 
the  expiration  of  the  time  allowed  him  for  that  purpose. 

(38)  The  minimum  quantity  allowable  for  transactions 
for  future  delivery  is  determined  by  the  kind  of  rente. 
Thus,  for  rentes  3  per  cent  it  is  3,000  francs  rentes,  or 
one-half,  say  1,500   francs;   for  rentes  4  per  cent,  4,000 
francs  rentes,  or  one-half,  etc.     For   other  securities  the 
minimum  quantity  is  25  units,  shares  or  bonds. 

68 


History    and   Methods    of  the   Paris    Bourse 

• 

(39)  The  purchaser  for  the  account  has  the  privilege 
of   demanding  delivery  before  maturity  by  tendering  the 
money.     This    is    what    is    called    " faculte    d'escompte" 
(privilege  of  discounting).     But  it  should  be  noted  that 
the  same  does  not  occur  when  the  seller  has  paid  "deport  " 
(a  premium  on  borrowed  stock)   at  the  last  liquidation ; 
that  is,  has  paid  a  certain  sum  (backwardation)  freeing 
him  from  immediate  delivery  by  putting  off  its  maturity 
for  a  future  date.     (See  No.  24.) 

(40)  On  the  curb  for  rentes  (coulisse  des  rentes)  options 
are  frequently  dealt  in  at  10  centimes  for  each  3  francs 
rentes  and  at  5  centimes  for  each  3  francs  rentes  for  the 
next  day;   that  is  to  say,  by  risking  50  francs  for  each 
purchase  of   1,500  francs   3  per  cent   rentes  when   oper- 
ating "dont"  10  centimes,  and  25  francs  for  1,500  francs 
rentes  3   per  cent  when   operating    "dont"    5    centimes. 
These  operations  are  commonly  spoken  of  as  "  dont  deux 
sous  pour  demain"   (option   2   centimes   till  to-morrow), 
"dont  un  sou  pour  demain"    (option   i    centime  till  to- 
morrow) .     The  option  declaration  takes  place  at  2  o'clock. 

(41)  The  Official  Quotation  List  of  the  Stockbrokers 
(la  Cote  officielle   des   agents  de  change)   establishes   only 
four    quotations    for    transactions    for    future    delivery 
(le  terme) :  The  opening  (le  premier) ,  the  highest  (le  plus 
haut),  the  lowest  (le  plus  has),  the  last  (le  dernier);   but, 
nevertheless,  business  is  done  at  intermediate  rates  (a  des 
cours  intermediates) . 

The  prices  of  options  (les  cours  des  primes)  appear  in 
the  columns  reserved  for  the  prices  of  fixed  bargains  (cours 
du  ferme) ,  and  below  these  prices ;  but  their  appearing  in 
this  or  that  column  does  not  indicate  at  what  moment 


69 


National    Monetary     Commission 

• 

they  are  dealt  in.  The  bank  (curb)  quotations  (les  cotes 
en  banque)  give  the  quotations  for  the  fixed  bargains  in 
the  following  order:  Opening,  lowest,  highest,  last  (debut, 
plus  bas,  plus  haut,  dernier).  Dealings  are  also  made  at 
intermediary  rates.  For  options  two  prices  are  published, 
the  lowest  and  the  highest,  without  indicating  the  time  in 
either  case. 

(42)  In  the  Paris  market  operations  for  future  delivery 
are  made  either  for  the  semimonthly  (h  quinzaine)  or  the 
monthly  settlement  (a  fin  de  mois). 

On  the  stockbrokers'  market  (au  marche  des  agents  de 
change)  they  deal  for  the  semimonthly  settlement,  except 
in  French  rentes  and  in  shares  of  the  Credit  Fonder  (a 
French  national  mortgage  loan  society,  see  §  72  of  Book 
IV. — Translator),  of  the  Banque  de  France,  and  of  the 
railroads,  which  are  dealt  in  for  the  end-of-the-month 
settlement.  Options  are  dealt  in  for  semimonthly  or 
monthly  settlement,  and  in  extreme  cases  for  the  third 
liquidation.  For  securities  subject  to  a  single  monthly 
liquidation  the  maturity  of  options  can  not  extend  be- 
yond the  second  liquidation.  Often  dealings  are  made 
in  options  at  10  centimes  per.  3 -franc  rentes  for  the  next 
day  (say,  50  francs  for  i,5oo-franc  rentes,  the  minimum 
of  transaction),  but  no  options  at  5  centimes,  as  on  the 
Coulisse.  The  option  declaration  for  the  morrow  is 
effected  on  the  day  indicated  at  2  p.  m. 

In  the  bankers'  market  (au  marche  en  banque),  i.  e.,  on 
the  Coulisse,  all  transactions  for  future  delivery  (opera- 
tions a  terme)  are  made  for  maturity  at  the  end  of  the 
month  (a  Vecheance  de  fin  de  mois) .  Options  are  dealt  in 
for  one,  two,  or  three  months.  The  latter  case  rarely 


70 


History   and   Methods   of  the   Paris   Bourse 

occurs.  The  small  operations  in  options  on  the  coulisse 
des  rentes  have  been  mentioned  above.  (See  No.  40.) 

Following  is  the  order  of  the  fortnightly  settlement 
(la  liquidation  de  quinzaine) : 

On  the  1 4th  (or  the  i3th,  if  the  i4th  is  a  holiday)  option 
declaration  takes  place  at  1.30  p.m.  The  i5th  (or  the 
day  following,  if  the  i5th  is  a  holiday)  is  for  liquidation  of 
operations.  The  next  day,  for  making  up  and  forwarding 
accounts.  On  the  day  following  the  debtors  must  settle. 
Two  days  later  the  creditors'  accounts  are  paid. 

The  end-of-the-month  (ultimo)  liquidation  is  carried  on 
as  follows: 

The  day  before  the  last  day  of  the  month  (or  two  days 
before  in  case  of  a  holiday)  option  declaration  takes  place 
at  1.30  p.  m.  The  last  day  of  the  month  (or,  if  that  is  a 
holiday,  the  first  session  of  the  following  month)  is  set 
for  liquidation,  sales,  purchases,  and  carrying-over  opera- 
tions, or  continuations  (reports).  The  following  day,  for 
making  up  and  forwarding  accounts.  The  day  after,  for 
payment  of  debtor  accounts.  Two  days  later,  for  pay- 
ment of  creditor  accounts. 

It  should  be  noted  that,  while  the  option  declaration 
preceding  liquidation  is  effected  at  1.30,  the  declaration 
of  options  for  the  next  day  takes  place  at  2  p.  m.  How- 
ever, on  the  day  of  option  declaration  preceding  liquida- 
tion the  declaration  takes  place  at  1.30  for  all  options 
given  for  that  maturity,  including  those  made  the  day 
before. 

On  the  day  of  liquidation  some  trades  are  made  for  the 
running  account  (en  liquidation  courante)  and  some  for  the 
next  account  (pour  la  liquidation  prochaine) ;  the  rates  for 


National     Monetary     Commission 

transactions  made  for  the  next  account  include  the  cost 
of  carrying  over.  The  party  giving  an  order  must  there- 
fore specify  whether  his  order,  given  on  settling  day,  shall 
be  executed  for  the  running  account  or  for  the  next  ac- 
count. In  the  absence  of  precise  instructions  the  order  is 
executed  for  the  running  account. 

(43)  As  far  as  possible,  parties  giving  orders  must  see 
that   their   instructions    for   the  liquidation  be  received 
before  the  "jour  des  reports  "  (contango  day) .    "Reports  " 
(continuations)  being  transacted  on  the  last  bourse  day 
of    the    month,   the    instructions    referred    to  must    be 
received  on  that  day  before  noon  at  the  latest.     It  is 
better  by  far  that  they  be  given  the  day  preceding.     In 
case  of  deliveries  of  securities,  they  must  reach  the  inter- 
mediary agent,  at  the  latest,  at  the  fourth  session  of  the 
following  month.     All  cases  for  the  account,  buying  or 
selling,  for  which  instructions  (to  take  up  or  carry  over 
purchases,  to  deliver  or  carry  over  sales,  or  to  clear)  are 
not  received  before  the  bourse  opening  on  the  morning  of 
the  "jour  des  reports"  (contango  day),  may  be  officially 
extended  until  the  next  liquidation. 

The  remarks  we  made  as  to  the  condition  of  securities 
to  be  delivered,  when  we  spoke  of  operations  for  cash,  are, 
of  course,  also  applicable  to  operations  for  future  deliv- 
ery. We  shall  now  show  what  happens  in  case  of  default 
on  the  part  of  an  intermediary  or  of  a  party  giving  orders. 
Then  we  shall  speak  of  expenses  occasioned  by  operations 
for  future  delivery. 

(44)  In  case  of  default  of  an  intermediary,   the   syn- 
dical  chamber  of  the  corporation  or  syndicate  to  which 
he   belongs    immediately   takes   the    measures    rendered 


72 


History    and   Methods   of  the   Paris    Bourse 

necessary  by  the  circumstances.  It  purchases  back  the 
securities  he  sold,  it  resells  the  securities  he  purchased, 
and  the  creditors  can  then  enter  their  claims  against  cash 
assets.  This  is  called  "execution"  (buying-in  or  selling- 
out).  The  parties  having  given  orders,  on  finding  them- 
selves thus  liquidated,  must  file  their  claims. 

The  party  who  gives  orders,  when  he  defaults  in  his 
engagements,  may  also  be  "executed"  (execute).  The 
effect  of  failure  on  a  business  man  is  loss  of  the  advan- 
tages of  dealing  for  the  account.  The  same  thing  hap- 
pens if,  owing  to  any  act  of  his,  he  reduces  the  guarantees 
given  to  his  intermediary,  or,  likewise,  if  he  declares 
himself  insolvent,  and  so  demands  his  own  "execution." 
However,  the  delay  which  a  speculator  makes  in  settling 
his  "liquidation"  account  (compte  de  liquidation — the 
account  to  be  settled  on  liquidation  days)  does  not,  in 
principle,  cause  him  the  loss  of  the  advantage  of  future 
delivery;  but  if  on  the  last  day  of  "liquidation"  a  specu- 
lator whose  transactions  had  been  carried  over  has  not 
settled  his  account,  the  stockbroker  has  the  right  to 
liquidate  his  affairs.  After  that  date  the  stockbroker  no 
longer  has  the  right  to  proceed  to  "execution,"  unless  he 
has  notified  the  giver  of  the  order  that  he  would  carry  him 
over  only  in  case  he  was  ready  to  settle  within  a  given 
time. 

While  the  right  of  "execution"  during  the  liquidation 
is  granted  to  the  stockbroker  (agent  de  change)  by 
article  69  of  the  decree  of  October  7,  1870,  that  right  is 
denied  to  the  curb  broker  (coulissier).  But  nothing 
prevents  the  banker  from  making  an  express  agreement 
with  his  client  to  carry  his  stocks  over  only  on  condition 

73 


National    Monetary     Commission 

of  immediate  settlement  of  the  "liquidation"  account  of 
previous  transactions. 

(45)  Expenses  for  transferring  registered  certificates 
taken  up  during  the  settling  days  are  borne  by  the  pur- 
chasers. As  explained,  when  speaking  of  operations  for 
cash,  they  amount  to  0.75  per  cent  of  the  amount  of  the 
trade. 

Transactions  are  subject  to  brokerage  or  commission 
charge,  a  table  of  which  follows.  The  present  rate  of 
brokerage  of  Paris  stockbrokers  dates  from  July  22, 1901 ; 
it  was  decreed  by  the  Minister  of  Finance,  under  whose 
direction  are  the  stockbrokers  trading  on  bourses  pro- 
vided with  "parquets."  The  rates  are  as  follows: 


French  rentes 


Funds  of  foreign  countries  dealt  in, 
amounts  of  principal  or  in  rentes. 


Shares  and  bonds: 

For  shares  and  bonds  when 
their  price  is  below  250 
francs. 

For  shares  and  bonds  when 
their  price  is  between  250 
and  500  francs. 

For  shares  and  bonds  when 
their  price  is  above  500 
francs. 

Operations  in  "Reports"  (continua- 
tions) in  French  rentes. 


12.50  francs  for  1,500  francs.  Rente 
3  per  cent  perpetual  or  amor- 
tisable. 

25  francs  for  the  smallest  denomi- 
nation negotiable  for  future  de- 
livery, and  so  on  in  the  same  pro- 
portion. 

25  centimes  for  each  share  or  bond. 


50  centimes  for  each  share  or  bond. 


One-tenth  per  cent  of  the  amount 
of  the  bill. 

12.50  francs  for  1,500  francs  of  3 
per  cent  rente,  perpetual  or  amor- 
tisable,  and  for  1,750  francs  of 
rente  3^2  per  cent. 


74 


History    and   Methods   of  the   Paris    Bourse 


On  all  other  securities: 

For  securities  subject  to  bi- 
monthly settlement. 

For  securities  subject  to  month- 
ly settlement.  I 

An  exception  made  for  foreign 
securities,  the  price  of  which 
is  above  60  francs. 

For  the  smallest  amount  dealt 
in  for  future  delivery  on  for- 
eign securities. 

For  securities,  the  price  of 
which  is  less  than  200  francs. 

For  securities  worth  from  200 
to  400  francs. 

For  securities  worth  above  400 
francs. 


One-twentieth  per  cent  of  the 
amount  of  the  bill. 

One-twelfth  per  cent  of  the  amount 
of  the  bill. 

15  centimes  for  the  smallest  denomi- 
nation negotiable  for  future  de- 
livery, and  so  on  in  the  same 
proportion. 

25  centimes. 


25  centimes  per  certificate. 
50  centimes  per  certificate. 

One-eighth  per  cent  (12.5  centimes 
per  100  francs)  on  the  amount  of 
the  bill. 


The  above  prices  apply  to  all  certifications  of  signatures 
given  by  stockbrokers,  even  when  not  attached  to  a 
purchase  or  a  sale. 

For  securities  not  fully  paid  in,  the  fees  given  above 
are  figured  only  on  the  net  amount  of  the  bill,  after 
deduction  of  the  part  not  yet  paid  in. 

Two  transactions  during  the  same  session,  one  purchase 
and  one  sale,  are  subject  to  a  commission,  calculated 
only  upon  the  item  giving  the  larger  figure.  The  ' '  franco, ' ' 
however,  does  not  apply  in  the  case  where  one  transaction 
is  for  cash  and  the  other  for  future  delivery. 

On  the  Coulisse  (marche  en  banque) ,  the  usual  commis- 
sions are  as  follows:  For  French  rentes:  12.50  for  each 
1,500  francs  of  3  per  cent  rentes. 

For  the  smallest  amount  negotiable  for  future  delivery 
in  foreign  state  securities,  25  francs. 

For  securities  the  price  of  which  is  below  50  francs,  25 
centimes  per  certificate 


75 


National    M  o  n  et  ar  y     Commission 

For  securities  the  price  of  which  is  between  50  and  400 
francs,  50  centimes  per  certificate. 

For  securities  the  price  of  which  is  above  400  francs, 
one-eighth  per  cent  (12.5  centimes  per  100  francs)  of  the 
amount  of  the  bill. 

The  commission  is  reduced  by  one-half  for  abandoned 
options  "dont"  10  centimes  (of  which  10  centimes  shall 
be  forfeited)  on  French  rentes. 

Continuations  are  subject  to  full  commissions,  and  not 
to  the  special  rates  of  commissions  for  continuations  on 
the  Parquet. 

FOURTH  DIVISION. — Exchange — Concerning  the  negotiation   of  bills  of  ex- 
change and  precious  metals. 

(46)  Article  76  gives  to  stockbrokers  the  privilege  of 
alone  negotiating  bills  of  exchange  for  account  of  others. 
For  a  long  time  the  stockbrokers  have  given  up  that  pre- 
rogative, and,  in  fact,  they  do  not  negotiate  a  single  bill 
of  exchange;  that  branch  of  business  is  carried  on,  unre- 
stricted, by  a  group  of  special  brokers,  whose  transactions 
fix  the  rates,  the    stockbrokers  intervening  only  to  give 
them  the  official  trade-mark. 

It  is  proper  to  investigate  that  business:  we  should 
indicate  in  a  few  words  what  is  the  bill  of  exchange;  and, 
because  it  is  treated  like  a  commodity,  subject  to  the 
fluctuations  of  bids  and  offers,  we  should  ascertain  what 
useful  purposes  have  been  served  by  its  transformation 
into  a  thing  fungible  to  the  highest  degree. 

(47)  We  need  not  study  here  the  exchange  contract 
from  a  theoretical  standpoint.     It  will  suffice  for  us  to  say 
that,  created  for  the  settlement  of   private   claims,  the 
bill  of  exchange  in  its  circulation  becomes  endowed  with 

76 


History    and   Methods    of  the   Paris    Bourse 

the  functions  of  insuring  international  settlements  without 
regard  to  persons.  Hence,  there  results  the  more  or  less 
active  quest  for  that  money,  giving  rise  to  the  advance 
or  decline  in  its  purchase  price,  within  limits  which  we 
shall  have  to  determine. 

How  does  the  letter  of  exchange,  originating  in  private 
relations,  turn  out  to  be  an  object  of  trade? 

Let  us  suppose  that  Peter,  of  Paris,  is  indebted  to  Louis, 
of  London.  Is  he  going  to  settle  in  metallic  currency  or 
bank  notes,  by  taking  upon  himself  the  heavy  cost  of 
freight  and  insurance?  It  is  simpler  to  purchase  a  bill  of 
exchange,  drawn,  for  instance,  by  Paul,  in  Paris,  on 
Lucien,  in  London.  He  will  indorse  it  to  Louis,  who  will 
collect  it  from  Lucien,  so  that,  simultaneously,  and  with- 
out the  transmission  of  metallic  currency,  Peter  will  have 
settled  with  Louis,  and  Lucien  with  Paul. 

Let  us  note  that  in  Paris  both  Peter  and  Paul  will  have 
found  profit  in  the  transaction — the  one  by  paying  his 
debt,  the  other  by  collecting  his  claim — without  the  trans- 
fer of  metallic  currency. 

Therefore,  the  seller  and  purchaser  of  bills  of  exchange 
find  it  advantageous  to  meet.  It  is  then  the  business  of 
the  broker  to  make  their  offers  and  bids  coincide. 

(48)  The  debates  on  offers  and  bids  fix  the  quota- 
tions^ If  Paris  has  made  large  purchases  in  London, 
and  London,  on  the  contrary,  is  but  slightly  indebted  to 
Paris,  bills  of  exchange  on  London  will  be  high;  in  the 
opposite  case,  they  will  be  freely  offered,  and  their  price 
will  fall.  But  whether  rising  or  falling,  exchange  rates 
have  a  limit;  when  rising,  it  is  the  point  where  the  debtor 
would  find  it  more  profitable  to  insure  payment  in  cash 


77 


National     Monetary     Commission 

than  to  buy  paper  at  too  high  a  price;  when  falling,  it  is 
the  point  where  the  creditor,  rather  than  sell  his  paper  at 
a  low  price,  would  find  it  advantageous  to  effect  the  col- 
lection in  his  debtor's  home  country;  in  both  cases,  that 
limit  is  what  is  called  the  "gold  point" — "export"  point 
of  metallic  currency  in  the  first  case,  and  "import"  point 
in  the  second. 

(49)  Such  are  the  principles  which  govern  the  rates  of 
exchange.  We  leave  aside  considerations  having  refer- 
ence to  the  relations  between  exchange  quotations  and 
the  general  economic  condition  or  the  monetary  condition 
of  any  given  country. 

Having  established  the  principles,  we  shall  ask  our- 
selves only  one  question:  How  can  securities,  which 
differ  from  one  another  either  by  the  signatures  bringing 
them  into  existence,  or  by  the  interval  between  the 
moment  of  the  negotiation  and  the  time  of  payment,  be 
brought  to  a  common  trading  basis;  or  in  other  words, 
how  can  the  bills  be  measured  in  terms  of  each  other, 
how  are  the  exchange  quotations  made? 

What  is  purchased  by  the  party  who  becomes  possessed 
of  a  bill  of  exchange?  He  purchases  the  right  to  collect 
the  face  value  of  the  bill,  but  only  after  a  certain  time. 
Besides,  it  should  be  noticed  that  the  certainty  of  payment 
is  subject  to  the  solvency  of  the  vouching  signatures. 

Hence,  these  two  consequences,  the  second  of  which  has 
but  a  theoretical  value:  (i)  The  purchaser,  in  considera- 
tion of  the  discount  up  to  the  time  of  collection,  will  be 
entitled  to  an  allowance  on  the  face  value;  (2)  two  bills 
drawn  for  the  same  face  value,  and  payable  within  the 
same  length  of  time,  should  be  quoted  at  two  different 

78 


History    and   Methods   of  the   Paris    Bourse 

rates,  in  accordance  with  the  rating  of  the  signatures. 
We  shall  see  that,  in  fact,  this  second  consequence  does 
not  occur  on  the  Paris  market. 

(50)  These  remarks  permit  us  to  explain  the  exchange 
quotations  as  published  by  the  Union  des  Banquiers. 

Below  you  will  find  the  quotation  list  of  October  17, 
1908: 


Check  payments, 
short  paper. 

Three  months' 
paper. 

Discount 
abroad. 

25/8  to  25/1  1 

25/io54  to  25/1354 

Per  cent. 
254 

Germany 

I22j^tOI23           

I22^g  tO  123^ 

99  54  to  99  s/& 

99  s/%  to  99  54 

Spain 

446  to  45  1 

444  to  449 

454 

Holland             ...      -.    

207^1  to  208^  

208  to  208  54  

3 

Italy 

QQ-JA  to  99f£ 

99^4  to  100 

New  York 

51354  to  51634 

51254  to   515x4 

6 

Portugal  _- 

451  to  461  

449  to  459  

6 

St.  Petersburg 

263  y&  to  265  y& 

262  54  to  264  54 

5% 

Switzerland        

99y§  to  99xs-  -    

99  !/%  to  TOO  

354 

Vienna 

IO4i9s  to  io4ff 

104^  to  io4y| 

Discount  street  rates: 
Paris 

25^ 

London 

i7A 

Brussels 

21A 

Bank  of  France  discount 

3 

Interest  on  advances 

354 

Treasury  bonds: 
One  to  three  months 

I 

Three  months  to  one  yea 

r 

i54 

The  rates  are  fixed  for  sight a  exchange — that  is  to  say, 
as  if  the  payment  was  demandable  immediately;  but  on 

a  The  quotation  at  sight  has  been  in  use  since  May  i,  1907;  previously, 
a  difference  was  made  as  to  whether  bills  were  negotiated  at  sight  or  at  three 
months.  In  the  first  instance,  an  allowance  was  made,  as  nowadays,  to 
the  benefit  of  J:he  purchaser,  for  the  time  that  he  might  have  to  wait;  in 
the  second  case,  on  the  contrary,  the  rates  having  been  established  by 
figuring  on  the  delay  of  three  months,  if  the  time  to  run  until  maturity  was 
less,  it  was  the  seller  who  got  the  benefit  of  the  discount  for  the  difference; 
in  the  first  case  the  rate  was  given  less  discount,  and  in  the  second  case  the 
rate  was  given  with  discount. 


90312° — i 


79 


National    Monetary     Commission 

these  rates  the  purchaser  is  allowed  for  each  bill,  on 
account  of  the  time  he  has  to  wait,  a  deduction  of  interest 
for  the  time  the  bill  has  to  run,  in  accordance  with  the 
rate  of  discount  ruling  in  the  country  where  the  payment 
is  to  be  effected;  that  rate  is  given  for  each  place  in  the 
column  on  the  right. 

One  can  see  that  the  rates  given  swing  between  two 
extreme  limits;  for  instance,  three  months'  paper  on 
lyondon  is  quoted  between  25.10^  and  25.13^  per  pound 
sterling.  These  indications  do  not  correspond,  as  the 
rates  given  for  bourse  securities  do,  to  rates  actually 
traded  on  during  the  session,  but  to  extreme  limits, 
between  which  the  average  rate  is  fixed.  Some  authors 
state  also  that  quotations  vary  between  these  limits, 
according  to  the  status  of  the  signatures;  but,  in  fact,  on 
the  Paris  market,  dealings  are  made  as  if  all  signatures 
were  equally  good. 

(51)  The  exchange  quotation  list  comprises  two  divi- 
sions, under  two  series  of  different  rates;  one  devoted  to 
"short  paper,"  the  other  to  "long  paper." 

"Short  paper"  is  paper  payable  within  one  month; 
' '  long  paper ' '  is  paper  which  has  more  than  one  month  to  run. 

Given  that  a  deduction  of  interest  is  made  on  the  ex- 
change rate  of  every  bill  according  to  the  time  elapsing 
until  its  payment,  it  would  appear  that  a  single  quotation 
would  be  sufficient,  since  the  delay  is  compensated  for,  day 
by  day,  by  a  reduction  in  price.  However,  the  necessity 
for  double  quotation  is  caused  by  a  real  duality  of  markets 
for  "long  paper"  and  for  "short  paper." 

From  an  economic  standpoint,  indeed,  these  two  cate- 
gories of  bills  do  not  play  the  same  part.  The  function 


80 


History    and   Methods   of  the   Paris    Bourse 

of  the  "  short  paper  "  is  restricted  to  that  of  an  instrument 
of  payment;  its  value  is,  therefore,  solely  regulated  by 
local  conditions. 

When,  on  balance,  Paris  is  London's  debtor,  paper  on 
London  is  sought;  if,  on  the  contrary,  London  is  shown 
to  be  a  debtor,  the  rates  on  London  will  fall.  In  the  first 
case  the  exchange  is  said  to  be  unfavorable;  in  the  second 
case  it  is  called  favorable. 

(52)  Offers  and  bids  for  "  long  paper ' '  are  influenced,  not 
only  by  local  conditions,  but  also  by  other  causes. 

First  of  all,  there  are  purchasers  who  buy  paper  as  an 
investment.  "The  rate  of  interest  is,  therefore,  their 
chief  concern.  The  rise  of  the  discount  rate  on  one  place, 
above  the  rates  prevailing  on  the  other  places  of  the 
same  order,  will  instigate  a  more  active  demand  for  long 
bills,  and  will  tend  to  cause  the  price  to  rise."a  Espe- 
cially, railroad  companies  often  invest  their  idle  funds  in 
purchases  of  bills  of  exchange. 

Secondly,  "  long  paper  "  comprises  a  speculative  element 
which  is  missing  in  the  "  short  paper  ";  that  element  is  the 
profit  which  the  purchaser  may  realize  by  getting  his 
paper  discounted  privately  at  a  rate  lower  than  the  offi- 
cial rate  prevailing  in  the  country  where  the  payment  is 
to  be  effected.  That  is,  there  will  be  a  profit  which  will 
amount  to  the  difference  between  the  discount  deduced 
by  inference  from  the  exchange  rate  (official  discount), 
and  the  actual  discount  at  which  he  will  have  the  bill 
discounted  privately;  the  profit  will  naturally  be  greater 
as  the  maturity  is  further  removed. 

a  See  article  on  Exchange,  by  M.  Aug.  Arnaune",  in  the  Dictionnaire 
d'Economie  Politique  of  L6on  Say. 


81 


National     Monetary     Commission 

Guided  by  the  same  considerations,  bankers  often 
undertake  what  is  called  the  "pensioning"  ("mise  en 
pension")  of  "  long  paper."  For  instance,  they  buy  ex- 
change on  London  at  2>i  and  then  "pension"  it  until 
maturity  in  one  of  the  large  banks,  which  retains  2  per 
cent.  They  get  the  benefit  of  one-eighth,  which  is  the 
difference  between  the  rate  of  discount  applied  in  the 
market  and  the  " pension"  rate.  As  to  the  large  banks 
where  paper  is  "  pensioned,"  if  they  do  not  take  it  for  their 
own  account,  it  is  because  they  may  have  reasons  for  por- 
tioning out  their  risks  and  for  scattering  the  responsi- 
bility, in  consideration  of  a  trifling  difference.  More- 
over, they  have  the  advantage  of  not  running  any  risk 
as  to  exchange.  The  bills  are  not  indorsed  to  them; 
they  hold  them  on  deposit  and  surrender  them  at  matu- 
rity to  the  depositor,  who  undertakes  the  collection  or 
negotiation. 

Thus,  "short  bills"  and  "long  bills"  are  two  distinct 
kinds  of  merchandise,  answering  different  requirements, 
the  prices  of  which  vary  under  distinct  influences ;  hence 
the  two  series  of  quotations. 

(53)  We  shall  have  done  with  these  short  notices  on 
the  exchange  quotations,  after  saying  that  in  Paris  they 
quote  "  I'incertain" — that  is  to  say,  they  quote  in  na- 
tional money  the  rate  of  a  fixed  quantity  of  foreign  money. 
This  is  the  general  rule,  and  among  foreign  cities  there  are 
but  London  and  St.  Petersburg  where  the  "certain"  is 
quoted — that  is  to  say,  where  the  price  of  a  fixed  sum  in 
national  money  is  quoted  in  foreign  money. 

Except  London,  for  which  the  price  quoted  is  that  of 
the  pound  sterling,  and  Spain,  where  the  quotation  price 


82 


History   and   Methods    of  the   Paris    Bourse 

of  500  pesetas  is  given,  the  Paris  market  quotes  the  price 
of  100  units  of  foreign  money — 100  florins  for  Holland, 
100  marks  for  Germany,  100  crowns  for  Vienna,  100 
rubles  for  St.  Petersburg,  100  dollars  for  New  York,  and 
loo  francs  for  Belgium,  Switzerland,  or  Italy. 

(54)  Each  day  the  quotation  list,  decided  upon  by  a 
committee  of  bankers  and  brokers,  is  transmitted  to  the 
Association   of    Stockbrokers    (Compagnie   des  Agents  de 
Change) ,  who  publish  it  below  the  Official  Quotation  List. 

Indeed,  as  we  stated  in  the  beginning,  the  stock  brokers 
(agents  de  change)  have  not  only  long  ago  given  up  their 
monopoly  in  this  sphere,  but  do  not  negotiate  bills  of 
exchange  even  in  competition  with  the  free  merchandise 
brokers  (courtiers).  The  negotiations  are  made  on  the 
bourse  for  securities  (bourse  des  valeurs),  either  directly 
between  bankers  or  through  the  mediation  of  exchange 
brokers  (courtiers  de  change). 

(55)  How  are  the  transactions  carried  out? 

Every  day  at  bourse  time  the  brokers  and  representa- 
tives of  bankers  gather  in  a  hall  specially  reserved  for 
them.  Transactions  which  could  not  be  settled  in  private, 
are  brought  out  before  the  gathering  (rather  restricted, 
however),  where  quotations  are  established  by  auction, 
just  as  before  the  large  crowds  of  the  market  in  securities. 

Merchandise  brokers  selling  paper  may  mention  the 
name  of  their  principal,  or,  if  the  latter  considers  it  to  his 
advantage  not  to  disclose  himself,  they  do  not  divulge  his 
name  to  their  purchaser  until  after  the  meeting.  Here, 
again,  a  difficulty  would  present  itself  concerning  the 
specification  of  the  thing  sold,  if  custom  did  not  solve  it 
in  a  general  way;  indeed,  it  may  happen  that  such  and 


National     M on  et ar y     Commission 

such  a  house  has  always  declined  the  acceptance,  or  now 
declines  the  further  acceptance,  of  this  or  that  signature, 
which  it  does  not  trust,  or  of  which  kind  it  has  already  a 
sufficient  number  on  hand;  but  then,  either  the  broker 
knows  beforehand  that  his  paper  will  not  be  taken  by  this 
or  that  fellow-broker  who  is  a  buyer,  or,  if  the  trade  is 
concluded  and  the  paper  not  taken,  the  matter  is  settled 
through  a  fellow-broker  by  means  of  the  "passage  de 
noms"  (passing  of  names) . 

Generally,  the  broker  deals  for  his  own  account,  and 
then  settles  with  his  client  at  the  average  rate,  taking  his 
profit  in  the  rate;  certain  houses,  however,  content  them- 
selves with  closing  the  transaction  at  the  actual  rate, 
reserving  for  themselves  a  brokerage,  which,  while  not 
officially  fixed,  is  nevertheless  established  by  custom  (for 
instance,  one-half  to  one-fourth  centime  for  exchange  on 
London;  one-sixteenth  to  one  thirty-second  centime  for 
exchange  on  Berlin) . 

In  his  intercourse  with  his  fellow-dealers  the  broker 
binds  himself  only  to  deliver  the  paper;  if  his  principal 
does  not  deliver  it,  he  must  procure  it,  losing  perhaps  the 
difference  in  price.  But  he  is  not  responsible  for  pay- 
ment at  maturity,  as  he  has  not  indorsed  the  paper. 
The  loss  falls  on  the  principal  who  agreed  to  take  the 
signature. 

Exchange  business  is  acquainted  with  "short"  sales. 
One  can  sell  i  ,000  pounds  sterling  at  such  and  such  a  rate, 
deliverable  in  eight  days;  he  has  then  eight  days  within 
which  to  procure  the  paper.  Transactions  for  future 
delivery  are  made  for  rather  short  periods — eight,  fifteen 


History    and   Methods    of  the   Paris    Bourse 

days.     Transactions   are   sometimes   made   for   a   longer 
period,  but  rarely  for  three  months. 

Contracts  are  always  followed  by  deliveries.  Con- 
tracts to  be  settled  by  payment  of  differences  are  not 
customary. 

(56)  Gold  and  silver  are  dealt  in  in  bars  i  ,000  fine — that 
is  to  say,  absolutely  free  of  any  alloy. 

Gold. — Prices  are  quoted  on  so  much  per  i  ,000  premium 
or  loss,  and  are  based  on  the  value  in  money  of  a  kilogram 
of  gold,  after  deducting  coinage  charges,  say  net  3.437 
francs  for  i  kilogram. 

Silver. — Since  January  2,  1901,  prices  are  given  in 
francs;  this  means  that  the  official  quotation  list  ex- 
presses in  francs  and  centimes  the  cost  of  the  kilogram 
silver  fine. 

FIFTH  DIVISION. — Bourses  in  the  departments. 

(57)  In  examining  the  bourse  system,  one  has  chiefly — 
almost  exclusively — in  mind  what  relates  to  the   Paris 
Bourse.     However,  the  French  financial  market  also  com- 
prises provincial  bourses,  the  importance  of  which  has 
greatly   diminished   as   business   centered   on   the   Paris 
market,  but  whose  activity  is  still  maintained  by  trans- 
actions in  local  securities. 

The  monopolizing  of  business  by  the  Paris  market  has 
given  rise  to  recriminations,  which  have  been  taken  up 
by  the  newspapers.  Sundry  remedies  have  been  recom- 
mended for  the  purpose  of  giving  a  new  lease  of  life  to 
provincial  bourses,  which  complain  of  painfully  vegetat- 
ing. It  is  not  this  phase  of  the  question  which  we  have 
to  pass  upon  here,  we  desire  only  to  indicate  in  a  general 


National     Monetary     Commission 

way  some  of  the  interior  regulations  by  which  these 
bourses  differ  from  the  Paris  institution. 

(58)  Provincial  bourses  are  divided  into  two  categories : 
The  bourses  with  "  parquets  "  (bourses  a  parquet),  and  the 
bourses  having  no ' '  parquet ' '  (bourses  sans  parquet) .  ' '  Par- 
quet "  means  a  slightly  raised  floor  surrounded  by  railings 
and  reserved  for  the  stockbrokers,  which  permits  the 
public  to  find  them  and  keeps  them  isolated  while  they 
trade. 

The  provincial  bourses  provided  with  a  "parquet"  are 
those  of  Lyon,  Bordeaux,  Marseille,  Nantes,  Toulouse, 
and  Lille.  The  Nice  "parquet"  was  done  away  with  in 
1887.  According  to  the  terms  of  article  14  of  the  decree 
of  1890,  bourses  comprising  at  least  six  offices  may  by 
decree,  and  after  fulfilling  certain  formalities,  be  provided 
with  a  "parquet."  At  present  Dunkirk  is,  in  fact,  the 
only  place  which  has  more  than  6  stockbrokers  and  is 
not  provided  with  a  "parquet;"  it  is  true  that  the  n 
agents  who  trade  there,  are,  at  the  same  time,  insurance 
brokers  and  ship-brokers-interpreters  (courtiers  interpretes 
et  conducteurs  de  namres) . 

The  differences  between  bourses  "a  parquet"  and 
the  bourses  without  a  "parquet"  are  not  important. 
First  of  all,  in  the  first  category,  stockbrokers  depend 
upon  the  Minister  of  Finance  (decree  of  July  2,  1862), 
while  in  the  second  category  they  depend  upon  the  Minis- 
ter of  Commerce  (or  upon  the  Minister  of  Colonies  when 
they  carry  on  business  in  a  French  possession).  (See 
ordinance  of  July  3,  1816,  and  April  6,  1834.) 

In  the  "parquet"  bourses  a  syndical  chamber  must 
be  elected  each  year,  the  number  of  members  varies, 

86 


History    and    Methods    of  the   Paris    Bourse 

according  to  the  number  of  members  in  the  corporation. 
(Art.  17  of  decree  of  1890,  modified  by  decree  of  June  29, 
1898.) 

In  the  bourses  without  a  "parquet,"  the  general  meet- 
ing of  stockbrokers  and  the  tribunal  of  commerce  exercise 
the  same  corporate  privileges  which,  in  the  "parquet 
bourses,"  are  exercised  by  the  syndical  chamber  (intro- 
duction of  successors,  honorary  memberships,  etc.). 

It  is  questionable  whether  the  consent  given  by  a  syn- 
dical chamber  to  the  nomination  of  an  unworthy  stock- 
broker may  entail  its  responsibility  toward  wronged  third 
parties.  It  is  clear  that  the  same  question  does  not  exist 
with  regard  to  the  general  assemblies  which  in  the 
bourses  without  "parquet"  fulfill  both  functions.  But 
as  far  as  syndical  chambers  are  concerned,  the  question 
does  not  seem  to  us  to  be  definitely  settled  in  the  matter  of 
responsibility. a 

Syndical  chambers  have,  in  addition,  disciplinary 
powers.  All  syndical  chambers,  since  the  decree  of  1890, 
have  the  power  to  impose  penalties.  Before  that  decree 
only  the  syndical  chamber  of  Paris  had  that  power 
conferred  upon  it  by  an  ordinance  of  May  29,  1816. 

According  to  the  terms  of  article  23  of  the  decree  of 
1890,  the  penalties  which  may  be  pronounced  by  the  syn- 
dical chamber  are  disapprobation,  censure,  and  interdic- 
tion to  enter  the  Bourse  for  one  month.  It  expressed 
ks  opinion  on  graver  penalties  (suspension  and  revocation) . 

From  the  standpoint  of  discipline,  the  stockbrokers  of 
bourses  without  a  "parquet "  are  placed  under  the  authority 
of  the  mixed  syndical  chambers,  ?:<tablished  in  accordance 

a  Lyon,  Caen  &  Renault.     Traite  de  droit  commercial,  vol.  4,  No.  883. 

87 


National    Monetary     Commission 

with  the  decree  of  January  5,  1867,  and  which  are  the 
same  as  those  for  insurance  brokers,  and  for  ship-brokers- 
interpreters. 

Let  us  add  that  in  all  corporations  having  a  syndical 
chamber  there  is  established  a  common  fund,  the  man- 
agement of  which  is  intrusted  to  the  syndical  chamber. 
(Decree  of  October  7,  1890,  art.  26.) 

We  may  mention  also  that  in  the  "  parquet  bourses" 
the  decree  of  October  i,  1862,  adds  to  the  qualifications 
demanded  from  candidates  for  the  office  of  stockbroker, 
that  they  produce  a  certificate  of  fitness  and  respecta- 
bility signed  by  the  heads  of  several  banking  or  commer- 
cial houses. 

Finally,  several  decrees  have  conferred  on  stockbrokers 
acting  on  "parquet  bourses"  the  right  to  certify  the 
transfers  of  registered  certificates  of  rentes  of  the 
sundry  types  made  payable  in  the  treasury  office  of  the 
department  where  they  do  business,  provided  these  trans- 
fers are  for  other  registered  certificates.  (See  especially 
for  the  rente  3  per  cent  the  decree  of  May  28,  1896.)  A 
decree  of  December  24,  1896,  has  extended  their  sphere 
to  all  registered  rentes,  without  distinction,  and  whatever 
may  be  the  department  in  which  the  arrears  are  ordered 
to  be  paid. 


BOOK  III. — Judicial   considerations    on    the    monopoly   of 

stockbrokers. 

Page. 

1.  What  is  meant  by  bourse  transactions? — -The  advantage  of 

making  a  distinction  between  private  transactions  in  secu- 
rities among  individuals,  and  bourse  transactions  proper  _  _       89-90 

2.  Bourse  transactions  are  mostly  orders  executed  in  a  market.       90-91 

3.  Commercial  bourses — Unattached  brokers — Bourses  for  secu- 

rities— Privileged  stockbrokers — Why  that  difference? 9J-92 

4.  Stockbrokers  are  intermediaries,  bound  to  secrecy,  not  allowed 

to   operate  for  their  own  account — They  are  commission 

agents  (commissionnaires) 92~93 

5.  Is  it  necessary,  even  on  the   Bourse,  to  resort  to  an  inter- 

mediary?— The  Report  of  Alexandre  to  the  Tribunate,  in 

year  IX..  93-94 

6.  Article  76  of  the  Code  de  commerce : 94~95 

7.  What  transactions  are  referred  to  in  article  76? 95-96 

8.  Why  the  words  "for  account  of  others"  in  reference  to  nego- 

tiations of  bills  of  exchange? 96-97 

9.  What  is  meant  by  " effets  publics "  (Government  securities)?.       97-98 

10.  What   is   meant   by  "other  securities  susceptible   of    being 

quoted  ?" 98-101 

11.  Do  the  securities  mentioned  in  the  second  part  of  the  official 

quotation  list  come  within  the  prerogatives  of  stockbrokers?  101 

12.  Securities   not   susceptible  of   being  quoted   may   be  freely 

dealt  in  by  unattached  intermediaries,  as  well  as  by  stock- 
brokers      101-102 

13.  First  penalty  for  violation  of  the  monopoly,  operations  void.   102-105 

14.  Second  penalty  for  violation  of  the  monopoly,  fine  in  police 

court,  without  prejudice  to  damages 105-109 

15.  Third  penalty  for  violation  of  the  monopoly,  internal  revenue 

fine 109-1 10 

1 6.  Concerning  brokerage  for  transactions  in  metals no 

(i)  By  the  words  "bourse  transactions"  are  meant 
transactions  in  a  public  market. 

When  a  party  enters  a  money  changer's  office  and  pur- 
chases from  him  or  sells  to  him  for  cash  or  future  deliv- 
ery one  or  more  shares  or  bonds,  he  does  not  exactly 
conclude  a  bourse  transaction,  but  a  transaction  in 
bourse  securities. 

89 


National    Monetary     Commission 

On  the  other  hand,  if  he  gives  a  bourse  order,  which  the 
receiver  of  the  order  will  carry  or  cause  to  be  carried  to 
the  market,  the  execution  of  that  order  is  a  bourse 
operation. 

If  a  banker,  to  replenish  his  stock,  goes  to  the  Bourse 
and  purchases  this  or  that  quantity  of  securities  for  cash  or 
for  future  delivery,  non-optionally  or  by  means  of  options; 
if  a  speculator,  noticing  a  difference  in  price  of  a  certain 
security  in  a  foreign  market  and  on  the  French  market, 
undertakes  an  arbitrage  by  buying  and  selling  alter- 
nately in  one  and  in  the  other,  or  vice  versa — these  are 
bourse  transactions. 

Often,  however,  in  the  ordinary  business  conversation, 
we  call  bourse  operations  not  only  those  effected  on  the 
Bourse  itself,  but  those  that  bear  upon  bourse  securities. 
It  is  not  a  rare  thing  to  hear  people  who  have  purchased 
securities  in  an  office  and  resold  them  there,  declare 
that  they  have  made  bourse  transactions.  It  is  because 
the  object  of  the  contract  is  confused  with  the  premises 
where  the  transactions  are  effected.  It  is  therefore  the 
duty  of  those  who  are  called  upon  to  arbitrate  difficul- 
ties arising  from  transactions  in  securities,  to  ascertain 
whether  the  transactions  were  trades  made  privately,  out- 
side the  Bourse,  or  were  transactions  in  a  public  market. 

In  private  trades  the  contracting  parties  are  bound  by 
their  agreements.  In  bourse  transactions  the  laws  and 
bourse  customs  govern  the  transactions  and  their  cus- 
tomers. 

(2)  The  first  way  to  transact  business  in  securities  is 
the  one  which  presents  itself  naturally  to  the  mind:  it  is 
the  direct  trade,  privately  concluded;  it  is  the  one  that 

90 


History   and   Methods   of  the   Paris   Bourse 

has  for  a  main  condition  the  relation  between  buyer  and 
seller,  who  know  each  other. 

Peter  enters  Paul's  banking  house;  he  purchases  10, 
20,  100  shares  or  bonds.  This  is  the  direct  trade,  pri- 
vately concluded. 

But  if  Peter  has  given  an  order  to  Paul,  if  Paul,  who 
receives  the  order,  transfers  it  to  the  Bourse,  where  it  is 
carried  out  apparently  for  him,  but  in  reality  for  his  client, 
Peter — that  has  been  a  commission  trade.  Most  of  the 
bourse  transactions  are  commission  trades. 

(3)  Bourse  transactions  are,  therefore,  such  transac- 
tions as  are  carried  out  on  all  public  markets  in  all  kinds 
of  merchandise.  Indeed,  in  every  market  they  trade  for 
cash  and  for  future  delivery,  non-optionally  and  on  options, 
and  we  see  there  buyers  who  declare  themselves  ready 
to  take  up  merchandise,  sellers  who  declare  themselves 
ready  to  deliver,  purchasers  who  resell,  sellers  who  buy 
back,  buyers  who  borrow  for  the  account,  and  sellers  who 
carry  over  the  execution  of  their  contract  until  the  next 
settlement. 

Whether  it  be  a  question  of  securities  or  merchandise, 
the  mechanism  of  transactions  is  the  same.  Only  the 
organization  of  the  markets  differs  in  the  two  cases. 
While,  in  the  case  of  merchandise,  brokers  enjoy  no 
privileges  whatever,  the  stockbrokers,  who  are  commis- 
sion agents  operating  on  the  Bourse  for  securities,  enjoy 
a  monopoly.  They  alone  may  negotiate  government 
securities  and  other  securities  susceptible  of  being  quoted. 

Merchandise  bourses  differ  from  bourses  for  securities, 
not  only  by  the  nature  of  the  articles  dealt  in,  but  also  by 
the  fact  that  the  carrying  on  of  the  commission  business 
is  untrammeled  in  the  former  and  is  not  in  the  latter. 

91 


National     Monetary     Commission 

There  existed,  indeed,  a  monopoly  of  commercial 
brokers,  which  had  been  established  for  merchandise, 
prior  to  the  Revolution,  at  the  same  time  as  the  privilege 
of  the  stockbrokers,  and  which,  together  with  the  latter, 
had  been  suppressed  in  1791  and  reestablished  in  year 
IX  of  the  Revolution.  But  the  commercial  brokers' 
privilege  was  suppressed  by  the  law  of  July  12,  1866. a 

Whatever  may  be  the  strength  of  the  reasons  broached 
for  or  against  the  discrimination,  the  monopoly  of  stock- 
brokers still  exists,  in  law  and  in  fact.  We  should  now 
investigate  its  nature,  its  scope,  and  the  laws  protecting  it. 

(4)  Stockbrokers  are  intermediary  agents. 

Article  74  of  the  Code  de  commerce  expressly  ascribes 
to  them  that  character:  "The  law,"  says  the  article 

°MM.  Lyon,  Caen  &  Renault,  in  their  treatise  " Droit  Commercial," 
Tome  IV,  note  under  No.  1035,  ca^  attention  to  the  fact  that  in  1866 
nobody  demanded  the  suppression  of  the  stockbrokers'  monopoly.  Sundry 
reasons  were  advanced  in  favor  of  its  preservation.  Their  part  is  not 
limited  to  negotiating  stock-exchange  securities;  they  certify  to  the  identity 
of  persons  and  the  correctness  of  signatures  for  the  transfer  of  government 
and  other  securities;  they  are  necessarily  depositaries  of  large  sums  and 
numerous  securities  for  a  certain  length  of  time;  everyday  they  verify  the 
prices  of  securities  and  especially  government  securities.  Thanks  to  the 
monopoly  of  stockbrokers,  the  Treasury  can  enjoy  a  perfect  safety  for  trans- 
fers where  its  responsibility  is  drawn  upon;  transactions  are  effected  with 
great  rapidity;  and  the  interests  of  inexperienced  persons  who  have 
to  deliver  securities  and  money  are  protected.  Such  is  the  summary 
of  the  reasons  given  by  the  Government  in  the  explanatory  statement  of 
the  law  of  July  18,  1866  (V.  J.  Bozerian,  De  I' Institution  des  agents  de 
change}.  MM.  Lyon,  Caen  &  Renault  answer:  "The  arguments  advanced 
in  favor  of  the  stockbrokers'  monopoly  are  not  conclusive.  The  mediation 
for  the  negotiation  of  securities  has  in  itself  no  official  character.  Besides, 
it  could  be  imagined  that  freedom  prevailed  in  this  matter,  and  that, 
without  any  monopoly,  measures  could  be  taken  for  the  verifying  of 
quotations  and  avoiding  the  most  serious  abuses.  Moreover,  there  are 
numerous  States  where  there  is  no  monopoly,  either  for  brokerage  in  mer- 
chandise, insurance,  or  freight,  or  for  the  mediation  in  the  matter  of 
negotiating  securities,  and  yet  the  freedom  does  not  appear  to  give  rise  to 
complaints." 

92 


History    and   Methods    of  the    Paris    Bourse 

referred   to,    "takes    cognizance    of    intermediary  agents, 
*     *     *     the    stockbrokers." 

They  must  keep  secret  the  name  of  parties  for  whom 
they  operate.  The  obligation  of  secrecy  is  imposed  upon 
them  by  article  19  of  the  decree  of  27  Prairial,  year  X. 

They  are  not  permitted  to  operate  for  their  own  account. 
Article  85  of  the  Code  de  commerce  forbids  it  to  them. 
The  result  is  that  apparently  they  deal  under  their  own 
name,  and  in  reality  for  account  of  their  customers. 

If  one  stops  to  think  for  a  moment  of  the  nature  of 
a  transaction  of  a  qualified  intermediary,  who  is  not 
permitted  to  reveal  the  name  of  his  principal  and 
not  allowed  to  deal  for  his  own  account,  he  will  easily 
recognize  that  the  transaction  presents  all  the  signs 
of  commission.  Article  94  of  the  Code  de  commerce,  more- 
over, says  expressly :  ' '  The  commission  agent  (commission- 
naire)  is  one  who  acts  in  his  own  name,  or  under  a  firm 
name,  for  account  of  a  principal." 

(5)  The  law  says  (art.  74  of  the  Code  de  commerce) 
that  it  takes  cognizance  of  intermediary  agents. 

But  is  one  really  bound  to  engage  an  intermediary 
when  he  wishes  to  transact  bourse  operations,  even  on  the 
Bourse  ? 

No;  the  law  has  never  said  that. 

Everyone  is  free  to  buy,  even  on  the  Bourse,  for  his 
own  account. 

Thus  it  was  that  Tribun  Alexandre,  who  in  the  year  IX 
was  reporter  of  the  law  of  28  Ventose,  said  in  his  report:" 
"No  doubt,  nothing  prevents  two  citizens,  who  trust 
each  other,  from  making  contracts  between  themselves, 

a  Archives  Parlementaires,  pp.  608  to  610. 


National     Monetary     Commission 

and  without  intermediary,  concerning  a  matter  mutually 
satisfactory.  But  it  would  show  a  poor  knowledge  of  the 
spirit  of  what  we  call  business,  to  infer  from  that  fact 
that  stockbrokers  are  useless.  It  happens  frequently  that 
he  who,  for  private  reasons,  or  owing  to  necessity,  deter- 
mines upon  selling  the  security  or  the  merchandise  he 
owns,  does  not  want  to  be  known,  and  that  the  one  who 
has  funds  for  investment,  does  not  wish  to  be  known 
either.  From  that  results  the  necessity  of  an  interme- 
diary to  facilitate  the  sale  to  one  and  the  purchase  to  the 
other." 

The  law  forces  no  one  to  apply  to  a  stockbroker.  But 
any  banker,  any  receiver  of  orders,  who  has  obtained  a 
bourse  order  or  instructions  to  carry  out  a  commission, 
must  apply  to  a  stockbroker,  since  only  a  stockbroker 
can  seek  a  purchaser  for  his  seller  and  a  seller  for  his 
purchaser. 

The  stockbroker  has  a  privilege  of  monopoly  as  "  com- 
missionnaire ' '  (commission  agent) .  No  one  can  exercise 
the  functions  of  "  commit sionnaire  "  on  the  Bourse  or  out- 
side the  Bourse  except  the  stockbrokers. 

(6)  The  extent  of  the  monopoly  is  fixed  by  article  76 
of  the  Code  de  commerce.  .  It  is  of  moment  to  recall  to 
mind  the  full  text  thereof: 

"The  stockbrokers,  organized  in  the  manner  prescribed 
by  law,  have  alone  the  right  to  negotiate  government  secu- 
rities and  other  securities  susceptible  of  being  quoted;  to 
negotiate  for  account  of  others  bills  of  exchange,  notes, 
and  all  other  commercial  instruments;  and  to  verify  the 
quotations  thereof. 


94 


History   and   Methods   of  the   Paris   Bourse 

"  Concurrently  with  merchandise  brokers,  the  stock- 
brokers may  attend  to  negotiations  and  brokerage  for 
sales  or  purchases  of  metals.  They  alone  have*  the  right 
to  verify  the  quotations  thereof." 

The  Code  de  commerce  dates  from  1807. 

In  reality,  it  is  not  that  text  which  gives  the  stock- 
brokers their  privilege. 

The  text  which  gives  that  privilege  is  a  prior  one, 
articles  6  and  7  of  the  law  of  28  Ventose,  year  IX  (19 
March,  1801),  thus  expressed: 

"ART.  6.  In  all  cities  where  there  is  a  Bourse,  there 
shall  be  stockbrokers  and  commercial  brokers  appointed 
by  the  Government. 

"ART.  7.  These  stockbrokers  and  commercial  brokers, 
who  shall  have  been  appointed  by  virtue  of  the  preceding 
article,  shall  alone  have  the  right  to  exercise  the  profession, 
to  verify  the  quotations  of  exchange,  the  quotations  of 
government  securities,  merchandise,  gold  and  silver  bul- 
lion, and  to  testify  before  courts  and  arbiters  to  the  truth 
and  to  the  quotations  of  negotiations,  sales,  or  purchases." 

When  the  Code  de  commerce  was  compiled,  the  atten- 
tion of  the  lawmaker  was  not  occupied  with  the  idea  of 
expanding  the  functions  of  the  stockbrokers,  but  only 
with  the  idea  of  specifying  them. 

(7)  ''Stockbrokers  alone  have  the  right  to  make  nego- 
tiations," says  the  Code  de  commerce. 

What  negotiations  are  meant?  Evidently,  negotiations 
of  intermediaries  and  commission  agents,  since  the  law 
has  qualified  stockbrokers  as  intermediaries,  and  has 
made  it  their  duty  to  transact  business  apparently  for 
themselves  and  in  reality  for  their  customers. 

90312°— 10 7  95 


National     Monetary     Commission 

In  other  words,  the  lawmaker  gives  to  the  stockbrokers 
the  monopoly  of  the  negotiations  he  intrusts  them  with. 
He  did  riot  wish  to  say  that  every  commercial  transaction 
in  securities  should  be  made  through  a  stockbroker.  He 
wanted  to  say  that,  having  created  intermediaries  who 
alone  have  the  power  to  act  as  such,  negotiations  of 
mediation  should  be  exclusively  reserved  for  them. 

(8)  While  carefully  reading  article  76  of  the  Code  de  com- 
merce, one  becomes  aware  of  a  difference  in  the  wording 
relative  to  the  negotiation  of  government  and  other 
securities,  on  the  one  hand,  and  negotiations  of  bills  of 
exchange,  notes,  and  commercial  instruments,  on  the  other. 

Article  76  of  the  Code  de  commerce  says,  indeed,  that 
stockbrokers  alone  have  the  right  to  make  negotiations  in 
government  and  other  securities  susceptible  of  being 
quoted,  and  to  make,  for  account  of  others,  negotiations 
in  bills  of  exchange,  notes,  and  commercial  instruments. 

Why  these  words  for  account  of  others? 

A  suspicion  crosses  one's  mind.  Why  has  the  lawmaker 
taken  the  trouble  to  say  that  the  stockbroker,  so  far  as 
bills  of  exchange,  notes,  and  commercial  instruments  are 
concerned,  acts  for  account  of  others,  and  did  not  say  that 
for  other  securities?  Is  it  with  a  view  to  lay  down  the 
rule  implicitly  that  for  the  other  securities  he  alone  may 
make  all  negotiations,  and  that,  consequently,  private 
individuals  can  not  act  for  their  own  account? 

This  would  be  making  a  big  mistake.  The  lawmaker 
never  enjoined,  and  never  would  enjoin,  upon  anyone  to 
have  recourse  to  an  intermediary — could  not  have  wanted 
to  do  so  by  means  of  a  mere  difference  in  wording,  by  some 
sort  of  subterfuge. 


History    and   Methods   of  the   Paris    Bourse 

Moreover,  this  difference  in  wording  may  be  rationally  ex- 
plained. In  the  matter  of  bills  of  exchange  there  can  be 
no  secrecy.  The  indorser  of  a  bill  of  exchange  will  neces- 
sarily be  known  to  the  purchaser.  In  consequence,  the 
stockbroker,  not  being  able  to  indorse  the  bill  of  exchange 
himself,  since  he  could  not  be  responsible  if  unpaid,  is 
bound  to  make  the  name  of  the  seller  known  to  the  pur- 
chaser.a  The  negotiation,  therefore,  in  itself  already 
carries  with  it  the  pointing  out  of  the  party  for  whose 
account  it  is  made. 

Consequently,  there  is  no  cause  to  dwell  upon  the  argu- 
ment drawn  from  the  words  "  for  account  of  others  "  with 
a  view  to  maintain  that  the  cooperation  of  a  stockbroker 
is  always  necessary  for  the  purchase  or  the  sale  of 
securities. 

But  the  stockbroker  has  a  monopoly  of  operations 
belonging  to  an  intermediary,  and  it  remains  true  that 
most  transactions  in  bourse  securities  (excluding  those 
made  over  the  counters  of  money  changers  and  bankers 
in  their  offices)  are  made  under  the  commission  system 
and  imply  the  resorting  to  an  intermediary,  and,  conse- 
quently, must  be  made  through  stockbrokers. 

(9)  However,  is  it  necessary  to  employ  a  stockbroker  for 
the  negotiation  of  all  transferable  securities,  whatever  they 
may  be  ? 

a  According  to  the  terms  of  article  10  of  the  decree  of  27  Prairial,  year  X, 
the  stockbroker  can  not  indorse  a  bill  of  exchange.  According  to  the  terms 
of  article  25  of  the  decree  of  27  Prairial,  year  X,  the  negotiation  of  a  bill 
of  exchange  makes  its  examination  a  necessity.  Therefore  the  stockbroker 
states  for  whose  account  he  is  trading. 

It  should  be  recalled  that  in  practice  stockbrokers  never  negotiate  bills 
of  exchange. 


97 


National    Monetary     Commission 

No ;  article  76  of  the  Code  de  commerce  includes  within  the 
privilege  only  government  and  other  securities  susceptible  of 
being  quoted. 

What  is  meant  by  "  effets  publics"  (government  securi- 
ties) ?  There  is  no  legal  definition  as  to  what  securities 
may  be  thus  termed.  We  can  only  refer  to  authors.  We 
refer  to  Volume  IV  of  the  Traite  de  Droit  Commercial  of 
MM.  Lyon-Caen  &  Renault.0 

"In  the  category  of  'effets  publics,'"  they  say,  "are 
reckoned  the  securities  issued  by  the  duly  constituted 
authorities  (especially  the  rentes  of  the  French  Govern- 
ment or  of  foreign  Governments,  securities  issued  by  the 
departments  or  townships,  French  Treasury  bonds,  which 
form  the  floating  debt,  etc.),  or  issued  by  permission  of 
the  authorities  (shares  and  bonds  of  railroad  companies, 
shares  and  bonds  of  corporations  created  with  the  author- 
ity of  the  Government  by  virtue  of  article  37  of  the  Code 
de  commerce) .  On  the  other  hand,  similar  securities  issued 
by  private  corporations,  not  subject  to  preliminary  author- 
ization, are  not  "effets  publics." 

(10)  What  is  meant  by  the  words  "and  others  sus- 
ceptible of  being  quoted?" 

The  words  "and  others  susceptible  of  being  quoted," 
which  appear  in  article  76  of  the  Code  de  commerce,  have 
given  rise  to  several  interpretations. 

0  No.  890.  MM.  Lyon-Caen  &  Renault  themselves  call  attention  in  a 
footnote  to  the  fact  that  their  solution  is  in  accordance  with  the  one  given 
by  Mollot  (Bourses  de  Commerce,  Nos.  123  et  seq.);  Buchere  (Traite  de 
Valeurs  Mobilieres,  No.  68) ;  Bozerian  (La  Bourse  et  ses  Operations,  Nos.  45 
and  412);  Ruben  de  Couder  (Dictionnaire  de  Droit  Commercial,  under  the 
words  "agents  de  change,"  Nos.  91  and  92);  and  Pour  V Ancien  Droit, 
Nowveau  Denisart,  under  "effets  publics." 


History    and   Methods   of  the   Paris    Bourse 

According  to  some  authors  °  these  words  apply  to  all 
securities  which,  owing  to  their  intrinsic  nature,  are,  at  any 
moment,  without  distinction  whatsoever,  qualified  to  be 
quoted  on  the  bourse  list.  According  to  other  authors6 
we  should  estimate  the  prominence  attached  to  any  given 
securities,  and  consider  as  susceptible  of  being  quoted  only 
those  which,  by  their  importance  and  their  great  number, 
would  be  likely  to  attain  a  wide  circulation,  leaving  out 
negotiable  values  that  are  little  known  in  the  market  and 
have  no  pretension  to  being  quoted. 

Finally,  a  third  system  highly  praised  by  MM.  Lyon-Caen 
&  Renault  in  their  "Precis  de  Droit  Commercial,"  and 
given  up  by  them  in  their  "  Manuel "  and  in  their  "  Traite" 
decided  that  those  securities  were  not  susceptible  of 
being  quoted  which,  either  on  account  of  their  intrinsic 
nature  or  on  account  of  any  legal  or  reglementary  inter- 
diction, can  not  be  admitted  on  the  official  list. 

The  court  of  cassation  (Cour  de  cassation} ,  by  means  of 
three  decisions,  of  July  i,  1885  (S.  1885,  i.  257,  D.  P. 
1885,  i.  386),  February  10,  1886  (Dr.  fin.  1888,  p.  222), 
and  March  9,  1886  (S.  1886,  i.  222,  D.  P.  1886,  i.  266), 
has  sanctioned  a  fourth  system,  including  in  the  expres- 
sion " securities  susceptible  of  being  quoted"  only  those 
which  were  declared  qualified  to  be  placed  on  the  bourse 
quotation  list  by  the  Syndical  Chamber  of  Stockbrokers — 
that  is  to  say,  which  fulfill  the  conditions  exacted  for  that 
purpose,  without,  however,  the  necessity  of  discriminating 
whether  they  have  actually  been  quoted  or  not.  The 

a  Mollot,  Bourse  de  Commerce,  No.  123;  Badorride,  Bourses  de  Commerce, 
Nos.  204  et  seq. 

6  Boistel.  Precis  de  Droit  Commercial  No.  683.  Buchere,  Traite  des 
Operations  de  Bourse,  No.  140;  Labbe\  Note,  Sirey,  1881,  I.  289. 

99 


National    Monetary     Commission 

words  " securities  susceptible  of  being  quoted"  are  there- 
fore synonymous  with  the  words  "securities  admitted  on 
the  quotation  list. ' '  This  interpretation  has  reconciled  the 
authors. a 

Hence,  by  "  securities  susceptible  of  being  quoted," 
are  meant  securities  which  have  been  acknowledged  by 
the  stockbrokers  as  qualified  to  be  placed  on  the  official 
quotation  list  of  the  bourse. 

Furthermore,  we  must  also  take  into  account  that  there 
are  two  categories  of  securities  which  can  not  be  quoted  — 
those   against  which   there  is  a  permanent   prohibition, 
resulting  from  a  statutory  text,  and  those  which  lie  under 
a  temporary  restriction  by  the  Minister  of  Finance. 

A  decree  of  December  3, . 1893,  prohibits  the  official 
quotation  of  shares  of  foreign  corporations,  the  par  value 
of  which  is  not  on  a  plane  with  the  par  value  of  shares 
sanctioned  by  French  law. 

Now,  the  law  of  August  i,  1893,  on  stock  companies, 
directs  that  the  par  value  of  shares  shall  be  100  francs 
minimum.  For  companies  having  a  capital  of  less  than 
20,000  francs,  the  par  value  of  shares  must  be  25  francs 
minimum. 

Article  5  of  the  decree  of  February  6,  1880,  empowers 
the  Minister  of  Finance  to  prohibit  the  official  quoting  of 
a  foreign  security. 

We  shall  now  sum  up  the  results  obtained  relative  to 
this  special  point.  Excepting  securities  against  which 
there  is  an  interdiction — either  general,  through  the  decree 
of  December  3,  1893,  or  special,  through  the  Minister  of 
Finance — securities  susceptible  of  being  quoted  are  those 

<*T.  i,  No.  1481. 

100 


History    and    Methods   of  the   Paris    Bourse 

which  stockbrokers  have  decided  to  carry  on  their  list, 
called  the  "Cote  Officielle"  (Official  Quotation  List). 

Consequently,  every  time  a  syndical  chamber  of  stock- 
brokers (une  chambre  syndicate  d  agents  de  change)  admits 
a  security  on  its  official  quotation  list,  the  chamber  itself 
proclaims  for  the  benefit  of  its  members  the  exclusive 
right  to  negotiate  the  same. 

(n)  Stockbrokers  have  the  privilege  of  carrying  cer- 
tain securities  in  a  special  place  on  their  list,  called  the 
"non-official  part"  (partie  nonofficielle) .  (Decree  of  Oct. 
7,  1890,  art.  20.)  They  can  not  carry,  in  that  part, 
securities  which  they  have  been  prohibited  from  quoting 
for  the  reasons  mentioned  above.  They  enter  thereon 
securities  comparatively  rarely  dealt  in.  It  would  be 
more  correct  to  say  that  that  portion  of  the  quotation 
list  is  not  permanent.  The  securities  admitted  on  that 
part  of  the  quotation  list  are  subject  to  the  privilege  of 
the  stockbrokers.0 

(12)  As  the  privilege  of  stockbrokers  applies  only  to 
government  and  other  securities  susceptible  of  being 
quoted,  all  other  securities  may  be  freely  negotiated  by 
unattached  intermediaries.6  These  are  the  coulissiers 
(curb  brokers). 

a  Trib.  correctionnel  de  Lyon,  12  mars,  1906.  Journal  I' Information  of 
March  9,  1906. 

&  Regarding  the  right  to  use  agents  other  than  stockbrokers  for  un- 
listed securities  or  securities  not  susceptible  of  being  listed,  the  following 
authorities  may  be  referred  to:  Trib.  civ.:  Seine,  23  April,  1898  (Journal  le 
Droit,  of  6  Oct.,  1898);  Paris,  21  Oct.,  1900  (Pand,  fr.,  1901,  2.209);  Paris, 
24  Oct.,  1900  (Le  Droit,  of  i  Dec.,  1900);  Paris,  19  Jan.,  1901  (Gazette  du 
Palais,  7  June,  1901);  Paris,  28  March,  1901  (Gaz.  des  Trib.  of  14  Sept., 
1901);  Trib.  corr.  Marseille,  of  29  June,  1903  (Rec.  Marseille,  1903, 
1.328);  Cour  de  Paris,  7  Feb.,  1906  (Cote  de  la  Bourse  et  de  la  Banque, 
21  Sept.,  1906). 


101 


National    Monetary     Commission 

But  the  stockbrokers  can  also  negotiate  securities 
which  they  have  not  the. right  to  quote. a  However, 
they  have  no  privilege,  as  stated  above. 

(13)  The  penalty  for  transactions  made  in  violation  of 
the  monopoly  of  the  stockbrokers  may  be  threefold:  It 
is,  first  of  all,  the  nullity  of  the  transactions.  It  has  been 
invariably  imposed  by  the  courts  (notably,  the  deci- 
sions of  the  Cour  de  cassation,  Ch.  crim.,  Jan.  19,  1860, 
and  Feb.  21,  1868;  Chambre  des  requites,  Feb.  28,  1881; 
Chambre  civile,  Apr.  22  and  June  29,  1885;  cassation, 
Feb.  8,  1888  and  1892,  Feb.  22,  1897). b 

In  spite  of  the  weight  which  decisions  of  the  court  of 
cassation  (Cour  de  cassation)  carry,  the  nullity  is  not  ad- 
mitted by  all  theorists. 

The  nullity  of  transactions  is  very  debatable.  No 
passage  of  law  pronounces  the  nullity.  However,  the  de- 
cree of  27  Prairial,  year  X,  is  framed  as  follows:  "  In  con- 
formity with  art.  7  of  the  law  of  28  Ventose,  year  IX,  all 
negotiations  made  through  unqualified  intermediaries  are 
declared  void."  In  conformity  with  article  7  of  the  law 
of  28  Ventose,  year  IX  *  *  *.  By  referring  to  the  law 

a  Lyon,  2  May,  1888  (Droit  Financier,  1888,  p.  264);  Trib.  civ.:  Seine, 
18  June,  1899  (Journal  la  Loi,  of  31  July,  1899);  Lyon,  27  March,  1902 
(Gazette  Palais,  1902,  1.715);  Lyon,  June  22,  1902  (Dr.  Fn.,  1902,  p. 
422);  Trib.  corr.:  Seine,  8  June,  1904,  p.  342.  (See  also  Cote  de  la 
Bourse  et  de  la  Banque,  of  21  Sept.,  1906.) 

&  Recueil  de  Sirey : 


1860. 
1868. 
1881. 
1885. 
1885. 
1888. 
1892. 
1897. 


.481 
.  1 68 

.  289 
.  250 

•  273 
.312 

•294 
.185 


102 


History    and   Methods   of  the   Paris    Bourse 

of  Ventose,  not  a  word  is  found  therein  permitting  one  to 
say  that  operations  are  void. 

M.  A.  Wahl  a  thinks  that  there  may  be  doubt  as  to 
nullity.  '"We  admit,"  he  says,  "that  the  natural  sanc- 
tion of  a  prohibitory  law  is  the  nullity  of  deeds  infringing 
upon  it,  but  only  when  no  other  penalty  for  its  transgres- 
sion exists;  here,  however,  criminal  actions  are  sufficient 
protection  for  the  stockbrokers." 

MM.  Baudry-Lacantinerie  and  Wahl b  are  of  the  opinion, 
that  it  is  untrue  that  every  interdiction  of  public  interest 
is  sanctioned  by  nullity.  "On  the  contrary,  it  is  certain 
that,  in  general,  nullity  is  not  inflicted  on  an  infraction  to 
a  monopoly."  The  case  is  different  when  a  solemn  con- 
tract is  exacted  in  order  to  safeguard  the  free  consent  of 
the  contracting  parties — as,  for  instance,  a  donation  or  a 
marriage  contract.  But  the  monopoly  of  stockbrokers 
has  been  established  only  for  effecting  transactions;  the 
consent  of  parties  remains  uncontrolled  even  when  they 
apply  to  other  agents  than  stockbrokers.  The  only  right 
that  is  ignored  is  the  privilege  of  the  stockbrokers.  Well, 
for  this  the  penal  restraint  suffices.  "No  one  has  even 
thought  of  asserting  that  an  auction  sale  of  chattels, 
made  without  employing  an  auctioneer,  would  be  void." 

Are  the  former  Council  decrees  of  September  24,  1724 
(art.  1 8),  and  November  26,  1781  (art.  13),  to  be  antago- 
nized? MM.  Baudry-Lacantinerie  and  Wahl  call  atten- 
tion to  the  fact  that  these  decrees  were  repealed  by  the 
law  of  March  17,  1791,  which  abolished  the  monopoly  of 

a  Traiti  theorique  et  pratique  des  Titres  au  Porteur  franqais  et  etrangers, 
1891,  T.  2,  969. 

b  Traite  theorique  et  pratique  de  Droit  Civil.     Du  Mandat.     No.  423. 


T03 


National     Monetary     Commission 

the  stockbrokers.  Article  2  of  the  law  of  September  15, 
1807,  has,  moreover,  repealed  "all  ancient  laws  regard- 
ing commercial  matters,  on  which  the  Code  de  commerce 
had  been  legislating."  Besides,  the  law  of  1886  on  time- 
bargains  has  particularly  repealed  the  council  decrees  of 
1724,  notwithstanding  the  previous  repeal,  because  the 
administration  of  justice  persisted  in  applying  it.  And 
that  repeal  applies  not  only  to  the  provisions  coming 
under  the  law  of  1885,  but  to  the  entire  decision.  The 
authors,  therefore,  decide  against  nullity. 

M.  Daniel  de  Follevillea  and  M.  Salzedo  b  claim  that 
negotiation  is  not  subject  to  nullity. 

MM.  Lyon-Caen  and  Renault c  admit  nullity.  These 
authors  maintain  that  the  ancient  laws,  so  far  as  an 
infringement  upon  the  monopoly  is  concerned,  may  have 
survived,  because  article  2  of  the  law  of  September  15, 
1807,  repeals  only  the  laws  regarding  matters  on  which 
the  Code  de  commerce  legislates.  Well,  the  Code  de  com- 
merce is  not  treating  of  infringements  on  the  monopoly. 
Besides,  MM.  Lyon-Caen  and  Renault  call  attention  to 
the  fact  that  the  reasoning  they  dispute,  would  lead  to  an 
inadmissible  conclusion;  that  is  to  say,  that  there  is  no 
penalty  for  unwarrantable  interference. 

But  it  may  be  objected,  it  seems  to  us,  that,  the  interfer- 
ence with  the  functions  of  stockbrokers  being  an  offense — 
and,  as  such,  punishable — it  is  not  correct  to  state  that 
interference  is  bereft  of  penalty.  The  law  of  28  Ventose, 
year  IX,  of  which  Chapter  V  of  the  Code  de  commerce 

aDe  la  Possession  des  Titres  au  Porteur.     No.  295. 

6  La  Coulisse  et  la  Jurisprudence,  p.  89. 

c  Traite  de  Droit  Commercial.     T.  IV,  note  under  No,  906. 


104 


History   and   Methods   of  the   Paris    Bourse 

is  the  successor,  erects  infraction  into  a  misdemeanor. 
Hence  the  former  provisions  of  1724  and  1781  appear 
as  having  possibly  been  repealed  by  the  law  of  September 
15,  1807. 

Therefore,  it  appears  to  us  inadmissible  that  transactions 
effected  through  unqualified  intermediaries  should  be  void. 
Consequently,  a  customer  could  ratify  transactions  made 
without  the  cooperation  of  a  stockbroker,  and  the  en- 
gagements undertaken  in  regard  of  these  transactions 
would  be  valid.  But  this  solution  is  purely  theoretical, 
since  the  administration  of  justice,  as  we  stated,  declares 
void  all  transactions  made  by  intermediaries  other  than 
stockbrokers,  when  the  negotiations  refer  to  securities 
with  regard  to  which  the  stockbrokers  have  reserved  the 
privilege  for  themselves,  by  listing  them  on  the  official 
quotation  list. 

(14)  We  come  to  the  second  sanction  of  the  monopoly 
of  stockbrokers.  Those  who  practise  the  profession  of 
stockbrokers  or  meddle  with  the  privilege  reserved  for 
these  ministerial  appointees,  are  liable  to  a  fine  in  a 
police  court,  without  prejudice,  of  course,  to  damages 
due  to  the  stockbrokers. 

This  fine  may  be  not  more  than  one-sixth  of  the  stock- 
broker's bond  and  not  less  than  one-twelfth. 

Article  8  of  the  law  of  28  Ventose,  year  IX,  says: 

"It  is  forbidden  to  all  individuals  other  than  those 
appointed  by  the  Government,  to  fulfill  the  functions  of 
stockbrokers  and  merchandise  brokers,  under  penalty  of 
a  fine,  which  shall  not  exceed  one-sixth  of  the  stock- 
broker's bond,  nor  be  less  than  one-twelfth. 


105 


National    Monetary     Commission 

"The  fine  shall  be  imposed  by  an  inferior  court  by  way 
of  correction,  enforceable  by  arrest,  and  the  money  shall 
be  applied  to  the  foundlings'  fund." 

What  does  the  unwarrantable  interference  with  the 
functions  of  stockbrokers  consist  of? 

It  consists  of  acts  belonging  to  these  functions ;  that  is 
to  say,  of  acts  of  mediation. 

Hence,  the  acting  as  intermediary  between  purchasers 
and  sellers,  as  a  commission  agent  would  do,  is  that  which 
constitutes  the  offense. 

This,  moreover,  was  expressly  stated  in  a  decision  of  the 
Cour  de  cassation,  rendered  in  a  lawsuit  brought  against 
26  coulissiers  (curb  brokers)  in  1859.  The  decision  says: 

"Whereas  acting  as  intermediary,  in  consideration  of  a 
commission  or  brokerage,  between  sellers  and  purchasers 
of  government  securities  and  other  securities  susceptible  of 
being  quoted,  or,  which  is  the  same  thing,  bringing  together 
sellers  and  purchasers,  preparing  and  carrying  out  the 
formalities  tending  to  the  effecting  of  the  purchases  and 
sales,  constitutes  making  negotiations  in  these  government 
and  other  securities.  *  *  *"a 

We  should  mention,  however,  that  a  suit  for  unwar- 
rantable interference  was  recently  brought  against  some 
bankers  for  effecting  private  dealings — direct  operations 
without  intermediary. 

These  transactions  are  positively  lawful.  But  it  is  self- 
understood  that  the  stockbrokers  ardently  wish  this  were 
not  the  case. 

a  Cour  de  cassation.  Jan.  19,  1860.  Sirey,  1860.  i.  481.  Also,  Cham- 
bre  criminelle.  Feb.  21,  1868.  Dalloz,  1881.  i.  9. 


106 


History    and   Methods    of  the   Paris    Bourse 

The  decision  of  the  First  Correctional  Chamber  of  the 
Seine  Court  (Tribunal  de  la  Seine)  on  April  n,  1907,  pro- 
claimed that  article  76  of  the  Code  de  commerce  estab- 
lishes the  privilege  of  commission  agents  for  the  benefit 
of  the  stockbrokers;  that  freedom  of  trade  is  one  of  the 
essential  principles  of  our  modern  law;  that  the  general 
provisions  governing  sales,  which  form  the  matter  of 
chapter  6,  book  3,  of  the  Code  civil,  contain  no  restrict- 
ing disposition  concerning  the  purchase  and  sale  of 
securities;  that  direct  transactions  in  securities  quoted 
or  not  quoted  are  therefore  lawful,  without  distinction  as 
to  whether  the  purchases  and  sales  are  for  cash  or  for  the 
account,  fixed  or  on  option,  refer  to  securities  in  specie  or 
in  genere,  or  whether  the  seller  is  or  is  riot  the  owner  at  the 
time  of  the  contract. 

However,  the  court  established  the  fact  that  the  bankers 
had  made  sales  and  purchases  for  clients-purchasers  and 
clients-sellers  at  the  same  price.  Therefore  there  was  un- 
warrantable interference,  since  it  was  a  case  of  agency. 
The  prosecuted  bankers  were  fined  25,000  francs. 

When  the  case  came  before  the  Cour  d'appel  (court  of 
appeals) ,  the  prosecuted  bankers  offered  to  prove  that  the 
inferior  court  had  made  no  audit  or  verification,  and  that 
they  had  never  matched  sales  with  purchases  and  pur- 
chases with  sales. 

Were  the  proofs  missing?  The  court  of  appeals,  by  its 
decision  of  April  9,  1908,  sentenced  the  appellants  with- 
out citing  any  case  of  agency.  The  decisions  mainly  rested 
on  the  fact  that  article  76  of  the  Code  de  commerce  provides 
differently  for  transactions  in  government  and  other  securi- 
ties, on  the  one  hand,  and  transactions  in  bills  of  exchange, 


107 


National    Monetary     Commission 

on  the  other,  in  making  in  the  first  case  the  mediation 
of  a  stockbroker  always  necessary,  while  not  so  in  the 
second;  that  this  difference  of  treatment  results  from  the 
words  "for  account  of  others"  inserted  in  article  76  con- 
cerning bills  of  exchange.  Finally,  according  to  the  Cour 
d'appel,  the  direct  transaction  is  one  where  the  owner  of 
the  securities  delivers  them  to  the  purchaser.  But  a  sale 
in  which  the  seller  does  not  hold  the  securities,  can  not 
be  direct;  the  mediation  of  a  stockbroker  is  necessary  for 
the  sale. 

These  views  have  stirred  up  very  violent  criticisms.0 
An  offense — that  is,  a  punishable  act — can  not  be  con- 
strued, a  monopoly  can  not  be  granted  an  excessive 
range,  by  forbidding  direct  transactions,  and  even  pun- 
ishing them — and  this  by  reason  of  a  difference  in  word- 
ing, which,  moreover,  is  readily  explained  by  the  different 
way  of  negotiating  securities  of  different  character.  (See 
above,  No.  8.) 

As  to  the  prohibition  forbidding  the  seller  who  is  short 
in  securities  to  sell  by  himself  or  to  undertake  to  make 
deliveries  without  the  agency  of  a  stockbroker — it  rests 
on  no  law  and  is  purely  arbitrary.  After  all,  it  is  rather 
the  mediation  which  constitutes  the  unwarranted  interfer- 
ence. 

The  decisions  of  the  Cour  d'appel  are,  at  the  present 
time,  before  the  Cour  de  cassation. 

Is  the  fine  imposed  by  the  law  of  the  year  IX  to  be 
calculated  on  the  security  bond  of  the  year  IX  or  of  the 

aVideDalloz,  1908,  1-153,  f°r  the  text  of  the  decision,  and  a  very  im- 
portant critical  note  by  M.  Percero,  professor  at  the  Faculti  de  Droit  in 
the  University  of  Dijon. 


108 


History   and   Methods   of  the   Paris    Bourse 

time  when  the  offense  was  committed?  The  Cour  de  cassa- 
tion in  1860  took  as  a  basis  the  security  bond  at  the  time 
when  the  offense  was  perpetrated.  This  solution,  sup- 
ported by  M.  Boistela  and  by  M.  Ruben  de  Couder,  is 
violently  criticised  by  others,  like  MM.  Buchere,  Mollot, 
Lyon-Caen  and  Renault.6 

There  are  no  extenuating  circumstances  when  it  comes 
to  unwarrantable  interference  with  the  offices  of  stock- 
brokers.0 

(15)  Finally,  we  reach  the  third  penalty  imposed  by  the 
law  upon  infringements  on  the  monopoly  of  stockbrokers, 
namely,  the  internal-revenue  fine.  The  law  of  April  13, 
1898  (art.  14),  does  not  allow  the  payment  of  the  tax  on 
bourse  transactions  in  securities  mentioned  on  the  official 
list  of  stockbrokers,  to  be  made  to  the  internal-revenue 
office  by  anyone  except  the  stockbrokers.  The  result  is 
that  when  a  banker,  who  is  bound  to  keep  a  register  for 
the  payment  of  the  tax,  enters  thereon  a  transaction 
reserved  for  the  stockbroker,  and  pays  the  amount  of 
the  tax  to  the  administration,  his  acts  constitute  a  viola- 
tion of  the  internal-revenue  law,  punishable  by  a  fine  of 
100  to  5,000  francs  according  to  article  32  of  the  law  of 
April  28,  1893. 

The  monopoly  of  stockbrokers  is  thus  protected  by  a 
triple  wall — (i)  the  nullity  of  transactions;  (2)  a  fine  in  a 
police  court;  (3)  an  internal-revenue  fine,  the  latter 

a  Boistel,  Droit  Commercial,  p.  431. 

b  Buchere,  Traite  des  Operations  de  Bourse,  No.  1 14.  Mollot,  Bourse  de 
Commerce,  No.  15.  Lyon-Caen  et  Renault,  Traite  de  Droit  Commercial, 
T.  IV,  No.  904. 

c C 'our  de  Paris,  Aug.  2,  1859.  Sirey,  1860,  i.  481.  Mollot,  Bourse  de 
Commerce,  No.  16.  Ruben  de  Couder,  Dictionnaire  de  Droit  Commercial, 
under  "Agent  de  Change,"  No.  15. 

109 


National     Monetary     Commission 

imposed  by  administrative  proceedings;  that  is,  without 
trial. 

According  to  the  terms  of  the  instructions  No.  2956, 
issued  by  the  general  direction  of  the  registry  office,  that 
provision  does  not  refer  to  direct  transactions. 

But  the  administration  of  the  registry  office  regards  as 
direct  transactions  only  those  which  are  made  for  money, 
securities  against  cash.  That  solution  is  quite  vulnerable. 

(16)  We  shall  close  the  inquiry  into  the  extent  of  the 
stockbrokers'  monopoly  by  a  special  consideration  of 
metal  transactions. 

Article  76  of  the  Code  de  commerce  divides  the  monop- 
oly of  such  transactions  between  the  merchandise  brokers 
and  the  stockbrokers. 

Now,  in  1866  (see  above,  No.  3)  the  functions  of  mer- 
chandise brokers  had  left  the  range  of  monopoly.  The 
trade  is  free.  The  result  is  that  transactions  in  metals 
are  free. 

However,  the  stockbrokers  alone  have  the  right  to 
certify  the  quotations. 


BOOK  IV. — Historical  and  economic  considerations. 

FIRST  DIVISION. — The  exchange  market — Origin  of  public  credit. 

Page. 

1 .  The  financial  market  in  antiquity 1 14-1 15 

2.  In  the  Middle  Ages.     In  1304.     The  exchange  market  at  the 

Grand  Pont.     Money  changers,  jewelers,  bird  dealers 115-117 

3.  The  first  bourses 117-118 

4.  The  sundry  sites  of  the  Paris  Bourse  from   1304  to   the   pres- 

ent time 118-119 

5.  How  corporations  were  established 1 19-1 20 

6.  Edict  of  1572.     Brokerage  raised  to  the  dignity  of  office 120—121 

7.  Edict  of  1595.     No  one  obliged  to  engage   the   services  of  a. 

broker ^ 12  i-i  22 

8.  Edict  of  1598.     The  office  of  broker  subjected  to  taxation 122 

9.  Decision  of  the  King's  council  of  1638.     The  brokers  are  called 

"agents  de  change" 122-123 

10.  In  1705.     The  loan  notes.     Securities  on  the  Bourse  must  be 

negotiated  by  the  "  agents  de  change" 1 23-1 24 

SECOND  DIVISION. 

11.  General  observations  on  public  credit  under  the  old  regime. _    124-125 

12.  Philip    the    Fair    and    his   successors.     The    Superintendents 

Enguerrand  de  Marigny,  Jacques  Coeur,  and  Semblancay__   125-128 

13.  Francis  I.     The  rentes  of  the  Hotel  de  Ville 128 

14.  The  successors  of  Francis  I,  Henry  IV,  and  Sully.     LouisXIII.   128-129 

15.  Louis  XIV  and  Fouquet 129-131 

1 6.  Colbert.     The  chamber  of  justice.     Colbert's  "Terror" 131 

17.  The  successors  of  Colbert.     The  lotteries.     The  tontine 131-132 

1 8.  Creation  of  offices.     Pontchartrain.     Samuel  Bernard 132-133 

19.  The  stock  companies 133-135 

20.  Companies  under  Louis  XIII —  135-136 

2 1 .  Companies  under  Louis  XI V  __   136-138 

22.  Under  the  regency.     Law.     The  Bourse  in  the  rue  Quincam- 

poix 138-140 

23.  After  the  system's  downfall.     In  1724.     The  Bourse  is  trans- 

ferred to  rue  Vivienne 140-142 

THIRD  DIVISION. — The  Council's  decisions  of  1724  to  1788 — The  financial 
market  on  the  eve  of  the  revolution. 

24.  The  Council's  decision  of  1724.     Its  aim.     Decision  of  1726.  _   142-143 

25.  Council's  decision  of  1733 143 

26.  Council's  decision  of  August,  1785 143-144 

27.  Council's  decision  of  March,  1786 144 

28.  Council's  decision  of  July  14, 1787 144 

90312° — 10 8  iii 


National     Monetary     Commission 


Page. 

29.  Council's  decision  of  June  10,  1 788 144-145 

30.  Securities  on  the  eve  of  the  revolution 145 

31.  A  glance  at  the  condition  of  public  finances  under  Louis  XVI . 

Agiotage  (stockjobbing) 145-147 

FOURTH  DIVISION. — The  financial  market  during  the  revolution. 

32.  Suppression  of  offices.     Suppression  of  " agents  de  change" 148-149 

33.  Mistake  frequently  made  concerning  the  results  of  the  financial 

market's  independence.     To  it  is  ascribed  the  stockjobbing 

that  took  place  at  the  time  of  the  revolution 149 

34.  The  real  cause   of  stockjobbing   during   revolutionary   times. 

Physiology  of  stockjobbing 149-151 

35.  Condition  of  the  public  debt  in  1789 _.   151-152 

36.  Creation  of  assignats.     Economic  disturbances  caused  by  their 

decline.     The  reason  for  the  decline 152-153 

37.  Closing  of  the  Bourse 153-154 

38.  Stockjobbing  outburst.     There  is  no  more  Bourse 154 

39.  Draconian  measures.     The  rise  in  prices 154-155 

40.  The  Bourse  reopens.     Law  of  the  13  Fructidor,  year  III.     The 

assignat  keeps  on  declining 155 

41.  The  law  of  28  Vendemiaire,  year  IV,  on  the  bourse  regulation.   156-157 

42 .  Considerations  on  what  occasioned  these  two  laws 157 

43.  Forty-five  billions   of  assignats.     The  territorial  drafts.     The 

rise  of  gold 158-159 

44.  The  great  ledger  of  the  public  debt 159 

45.  Bankruptcy  threatens 159 

46.  Bankruptcy 159-161 

47.  The  law  of  the  28  Ventose,  year  IX 161 

48.  The  decree  of  27  Prairial,  year  X 161-162 

49.  Dealing  for  future  delivery  not  forbidden  to  private  individuals.       162 

50.  The  bourse  quotation  list  in  1800 162 

FIFTH  DIVISION. — The  nineteenth  century. 

51.  Three  kinds  of  events  constitute  the  history  of  the  financial 

market:  Expansion  of  public  and  private  credit.  Develop- 
ment of  dealings  for  future  delivery  and  their  being  recog- 
nized as  legal.  The  struggle  of  the  "  Parquet "  against  the 
"Coulisse" 162-163 

52.  Public    credit  develops   transferable   securities.     Transferable 

securities  develop  public  credit 163-164 

53.  Condition  of  securities  at  the  end  of  the  nineteenth  century.  _   164-169 

54.  The  evolution  of  credit  and  the  public  debt 1 69-1 70 

55.  The  financial  trouble  at  the  time  of  the  bankruptcy  until  1801- 

Foundation  of  the  Bank  of  France 170 

56.  The  perpetual  debt,  from  18  Brumaire,  year  VIII,  to  the  begin- 

ning of  1909 171 

57.  The  rente  certificate  made  popular 171-172 

112 


History   and   Methods   of  the   Paris   Bourse 


Page. 

58.  The  emission  proceedings.     Loans  placed  by  contracts 172-174 

59.  Loans  of  departments  and  of  municipalities 174 

60.  Loans  of  colonies  and  protectorates 174-175 

61.  Stocks  of  foreign  governments 175-176 

62.  Insurance  stocks 176-177 

63.  Railroads,  and  first  speculation  in  railroad  shares 177-178 

64.  The  Revolution  of  1848,  and  a  great  tumble  in  railroad  shares.  _       178 

65.  From  1852  until  the  agreements  of  1883 178-179 

66.  The  agreements  of   1883.     The  Government  guarantees  divi- 

dends to  shareholders 179 

67.  Railroads  of  local  interest 180 

68.  Foreign  railroads  and  the  French  financial  market 180-181 

69.  Lump  statistics  of  railway  securities 181 

70.  Creation  of  sundry  companies  from  1822  until  1852 181-182 

7 1 .  The  Comptoir  d'Escompte  de  Paris 182-184 

72.  The  Credit  Fonder.     The  Credit  Agricole 184-186 

73.  The  Credit  Mobilier 187 

74.  Other  credit  companies 187-188 

75.  The  part  played  by  the  Bank  of  France  in  the  movement  of 

securities 188 

76.  The  downfall  of  the  Union  Generate 189-191 

77.  Present  preponderance  of  a  few  large  banks 191-192 

78.  The  financial  institutions    and    the  securities    circulating    in 

France  in  1908 192-193 

79.  The  part  of  the  financial  market  in  the  circulation  of  securi- 

ties. _  .   193-194 

80.  The  French    financial   market  has  fulfilled  its  mission,  but  it 

has  only  been  able  to  do  so  by  ridding  itself  of  the  shackles 
fastened  on  it  by  the  laws  of  the  year  IX.  The  "Coulisse's" 
rivalry  gives  to  the  market  the  necessary  freedom 194-196 

81.  In  i8i6the  "agents  de  change"  become  owners  of  their  offices.   196-198 

82.  Ordinance  of  November  23,  1823 198 

83.  In    1862    the    "agents    de    change"    are    authorized    to    take 

special  partners 198 

84.  The    law  on  transactions  for  future    delivery.     Its    economic 

importance 1 98-201 

85.  The  first  consul  and  Count  Mollien 201-204 

86.  The  bourses  and  dealings  for  future  delivery  under  the  First 

Empire.     The  Code  de  commerce  of  1 807 204-206 

87.  The  Forbin-Janson  lawsuit.     The  Parere  (merchants'  petition) 

of  1824 206-209 

88.  In  1833.     The  Harle  proposition.     Speech  of  Garnier  Pages.  209-210 

89.  The  Parere  of  1842 210-211 

90.  In  1867 211 

91.  After  the  downfall  of  the  " Union  Generate"     Public  opinion 

is  stirred  up.  The  Paris  Chamber  of  Commerce  passes  a 
resolution , 211-213 

"3 


National    Monetary     Commission 

Page. 

92.  In  the  Chamber.     M.  Alfred  Naquet.     M.Lagrange.     A  special 

commission  is  appointed.     M.  Lyon-Caen 213 

93.  The  law  of  March  28,  1885 213-215 

94.  The  quarrel  between  the  "  Parquet"  and  the  "Coulisse."     The 

origin  .__  215-217 

95.  Under  the  First  Empire 217-218 

96.  Under  the  Restoration.     Under  the  July  Monarchy 218 

97.  The  lawsuit  of  1859 218-220 

98.  The  "Coulisse"  reappears.- 220 

99.  After  the  war  of  1870.     Quieter  times  on  the  Bourse 220-224 

100.  Contentions  start  afresh  in  the  market  in  1892 224-225 

101.  In  1893.     The  tax  on  bourse  transactions.     M.  Tirard' s  plan.  225-228 

102.  Adopted  in  the  Chamber,  the  Tirard  plan  is  thrown  out  in  the 

Senate.     The  system  is  adopted 228-230 

103.  The  Transvaal  gold  mines  on  the  Paris  Bourse 230-233 

104.  The  "agents  de  change"  act.     They  endeavor  to  profit  by  the 

movement.    The  Graux  proposition  and  the  25  franc  shares.  233-235 

105.  The    Lacombe   and  Fleury-Ravarin  amendments.     Return  to 

the  Tirard  system 235-237 

106.  Reorganization  of  1898 237-240 

107.  Unusual  circumstances  under  which  the  discussion  was  started 

in  Parliament.  The  bill  taken  away  from  the  Senate.  The 
arguments  brought  to  the  rostrum.  Reorganization  and 
the  Dreyfus  affair 240-245 

108.  The  attitudeof  the  "Coulisse" 245-247 

109.  The  professional  syndicates  of  the  "  Coulisse" 247-249 

1 10.  Strange  position  of  the  curb  brokers  (coidissiers) 249 

in.  The  strengthening  of  monopoly  not  equitable  from  the  stand- 
point of  public  rights 249-254 

112.  Neither  from  the  economic  point  of  view.     The  advantages 

of  monopoly.  Public  credit.  The  quotation  list  and 
private  credit.  Joint  liability  of  intermediaries 254-268 

113.  The  reorganization  of  1 898  made  light  of  the  State's  interests.   268-270 

114.  The  arrangement  of  1901 270-274 

115.  Final  considerations __   274-276 

FIRST  DIVISION. — The  exchange  market — Origin  of  public  credit. 

(i)  The  history  of  the  French  financial  market  is  closely 
connected  with  the  history  of  commerce.  From  a  more 
particular  point  of  view,  it  is  closely  connected  with  the 
history  of  corporations,  as  well  as  with  that  of  public 
credit. 

Very  little  information  can  be  found  in  the  works  of 

114 


History   and   Methods   of  the   Paris   Bourse 

the  ancients,  concerning  the  organization  of  commercial 
bourses  (bourses  de  commerce)  and  the  transactions  there 
carried  on.  A  kind  of  public  market  existed  in  Rome 
during  the  Consulship  of  Appius  Claudius  and  Publius 
Servilius — that  is  to  say,  five  hundred  years  before  Christ. 
It  was  called  the  Collegium  mercatorum  (assembly  of 
merchants) .° 

(2)  Up  till  the  Middle  Ages,  trading  on  the  fairs  affected 
only  wares.  The  payments,  however,  which  the  sales 
necessitated  involved  transactions  in  exchange.  To  the 
fairs  of  Brie  and  Champagne,  to  the  fairs  of  Lyon,  Beau- 
caire,  and  Montpellier,  there  thronged  a  multitude  of 
foreign  traders,  who  sold  wares,  or  bought  wares  in  order 
to  resell  them  in  their  own  countries.  There  one  would 
see  Italian,  German,  Brabantine,  Spanish,  Portuguese, 
Barbarian,  and  even  Egyptian  traders — and  in  an  un- 
broken line  there  stood  "  the  money  changers,  whose  tables 
glittered  with  gold  and  silver  coins  and  with  money  from 
every  country." b 

a  M.  Edmond  Guillard  (Les  Banquiers  atheniens  et  romains,  trapezites  et 
argentarii,  Paris  1875,  Guillaumin)  explains  that  some  freed  Greek  slaves 
were  the  first  ones  at  Rome  to  carry  on  the  banking  business  and  to  prac- 
tise money  changing.  He  points  out  that  the  argentarii  (bankers)  were 
doing  business  at  the  beginning  of  the  eleventh  century  before  Christ.  In- 
dependently of  the  offices  which  they  had  inside  their  establishments,  they 
occupied  branch  offices  (tabernaz)  on  the  forum,  where  they  could  be  found 
every  day  at  a  specified  hour.  It  was  the  hour  which  the  merchants,  the 
manufacturers,  and  the  capitalists  of  Rome  also  chose  for  assembling. 
Two  centuries  later,  when  the  riches  of  the  world  became  concentrated  in 
Rome,  the  bustle  which  this  kind  of  bourse  presents  is  so  great  that  the 
author  compares  the  scene  in  the  forum  with  that  in  La  rue  Quincampoix 
in  Paris  at  the  beginning  of  the  eighteenth  century. 

Plautus  (Truculentus,  Act  i,  scene  i)  alludes  to  the  crowd  of  merchants 
and  bankers  in  the  public  square,  among  whom  there  mingled  also  the 
courtesans. 

&  See  Amans  Alexis  Monteil,  Histoire  des  FranQais  des  Divers  Etats,  vol.  i. 
The  Epistles  of  Brother  Jehan,  Franciscan  friar,  to  Brother  Andr6,  friar  of 
Toulouse,  Epistle  CXXI V :  The  fair  of  Montrichard. 

"5 


National    Monetary     Commission 

In  the  commercial  towns,  operations  of  exchange  as  an 
established  function — that  is  to  say,  outside  of  those  which 
took  place  at  the  fairs — could,  in  fact,  be  executed  only 
in  a  specified  place.  An  Ordinance  of  King  Louis  VII, 
dated  1141,  the  original  of  which  seems  to  be  lost,  had 
assigned  the  Grand  Pont  of  Paris  to  the  business  of  ex- 
change, and  made  it  an  offense  to  practise  it  elsewhere. 
But  the  text  of  the  ordinance  of  1304,  issued  under  Philip 
the  Fair,  and  having  almost  the  same  purpose,  has  been 
preserved.0  The  specified  place  has  since  then  borne 
the  name  Pont-au-Change.b  As  early  as  1423  those  who 

°  Philippus  Deo  gratia  Francorum  rex:  notum  facimus  universis  tam 
proesentibus  quam  futuris,  quod  nos  ad  ea,  que  pro  bono  communi  utilius 
expedire  videntur  aciem  considerationis  dirigere,  et  propter  hoc  eorum  qui 
facto  cambii  Parisiensis  ingruunt  statum  et  usum  in  melius  ordinare  stu- 
dentes,  duximus  ordinandum.  Quod  cambium  Parisiense  erit  et  tenebitur 
super  nostrum  magnum  pontem  solummodo,  a  parte  gravie,  inter  ecclesiam 
beati  Leofredi  et  majorem  archam,  sive  deffectum  ipsius  Pontis,  pro  ut  Hac- 
tenus  ante  corruptionem  ponds,  ejusdem  quondam  lapidei  extitit  consuetum. 
Item  quod  nulli  omnico  liceat  alibi,  quam  in  loco  illo  cambiare,  seu  cambium 
tenere  Parisus,  aut  infra  banleucam,  et  quod  si  contra  hujusmodi  ordina- 
tionem  nostram  secus  fieri  contingat  in  posterum,  et  reperiri,  pecunia  seu 
resilla  quoe  alibi  quam  in  loco  ad  hoc  per  nos  ordinato,  cambiare  fuerit, 
vel  ad  cambiandum  fuerit  ordinata  nobis  cedet  penitus  in  commissum. 
Item,  quod  si  per  aliquem  habentem  sedem  seu  locum  in  cambio  praedicto 
commissum  hujusmodo,  delatum  fuerit  volumus,  et  ne  frusta  se  in  hoc 
laboresse  doleat,  ei  concedilus,  quod  cum  pecunia,  seu  res  ilia  per  gentes 
nostras  fuerit  tanquam  comissa  judicata  nobisque  applicata,  quatuor  par- 
tibus  illius  pro  jure  nostro  retentis,  ipse  habeat  quartam  partem  residuam 
sibi  pro  salario  et  labore  suo,  per  gentes  easdem  de  speciali  gratia  libe- 
randum.  Quod  ut  firmum  permaneat  in  futurum,  salvo  in  omnibus  jure 
nostro  et  etiam  alieno,  presentibus  litterio  fecimus  nostrum  apponi  sigillum. 
Actum  Parisiensus  anno  domini  millesmo  trecentesimo  quarto  mense  Feb- 
ruarii.  (De  Lauriere.  Ordonnances  des  Rois  de  France.  Imprimerie 
Roy  ale  1723,  Tome  i  Page  426). 

&  There  were  two  Grands  Fonts,  one  which  had  become  the  Pont  au 
Change,  the  other,  the  Pont  Notre  Dame.  The  latter  was  in  fact  the  Pont  des 
Planches  du  Mibray  (Bridge  of  Boards  of  Mibray).  (See:  de  Menorval. 
Paris  depuis  ses  origines  jusqu'a  nos  jours,  t.  i,  p.  241.  A.  Robida.  Paris 
A  Travers  L'Histoire,  p.  678.)  The  Grand  Pont,  built  of  wood  ages  ago, 
and  several  times  burned  or  carried  away  by  the  streams,  became  loaded 
with  houses  around  the  eleventh  century.  The  wheels  of  mills  revolved 
beneath  its  arches.  To  the  millers'  houses  were  added  goldsmith  shops. 

116 


History   and   Methods   of  the   Paris   Bourse 

were  engaged  in  money-changing  carried  on  their  business 
with  permission  of  the  King. 

(3)  It  is  at  Bruges  that  the  Bourse  was  for  the  first  time 
called  by  that  name.a  In  Holland  bourses  were  estab- 
lished at  a  very  early  date.  So  far  as  this  country  is 
concerned,  a  long  debt  of  gratitude  is  due  to  the  Jews  for 
these  useful  institutions;  the  persecutions,  furthermore, 
which  these  courageous  and  untiring  merchants  experi- 
enced in  Spain  after  the  expulsion  of  the  Moors,  were  the 
cause  for  their  establishment  in  the  Netherlands. 

The  Bourse  of  London,  the  establishment  of  which  came 
after  the  foundation  of  the  Bank  of  England,  was  likewise 
instituted  by  these  bold  merchants  who  came  to  Great 
Britain  in  the  retinue  of  William  of  Nassau. 

In  France  the  first  bourses  to  be  legally  instituted  were 
established,  first  at  Lyon,  then  at  Toulouse,  in  July,  1549, 
under  Henry  II,  then  at  Rouen,  around  1565,  and,  later, 
at  Bordeaux,  in  February,  1771,  under  Charles  IX.  The 
names  by  which  these  meeting  places  were  known  varied 
considerably.  At  Rouen  the  market  place  was  called 

Only  one  arch  was  used  by  passing  boats.  It  was  considered  the  property 
of  the  Hanse  des  Marchands  (Merchants'  League).  This  bridge,  assigned 
to  the  use  of  the  exchange  merchants  was  also  the  bridge  of  the  bird 
sellers  (Pont  des  Oiseliers).  The  bird  merchants  had  obtained  the  privi- 
lege of  setting  up  there  and  of  hanging  their  cages  beneath  the  awnings 
of  the  exchange  shops,  provided  they  furnished  birds  which  were  to  be 
released,  as  a  manifestation  of  rejoicing,  whenever  a  king  or  a  queen  passed 
by.  This  privilege  was  the  cause  of  frequent  quarrels  between  the  ex- 
change merchants  and  the  bird  merchants,  and  sometimes  of  truly  mock- 
heroic  brawls.  Thus  we  see  the  origin  not  only  of  the  name  Pont  au  Change 
but  also  of  quai  des  Orfevres  (Goldsmiths'  wharf)  and  of  rue  des  Lombards 
(Pawnbrokers'  street) — names  of  localities  near  by.  As  for  the  bird  sellers, 
one  may  still  see  them,  especially  in  these  sections,  plying  their  trade  on 
the  wharves  of  the  Seine,  even  as  late  as  the  twentieth  century. 

a  It  seems  that  at  Bruges  the  merchants  would  come  together  in  the 
house  of  one  of  their  number,  known  as  van  der  Burse.  According  to 
others,  the  house  where  the  meeting  took  place  had  three  purses  (bourses) 
carved  on  its  gable  (Lyon-Caen  et  Renault.  Traite  de  Droit  Commercial, 
t.  IV,  No.  859). 

117 


National    Monetary     Commission 

Convention. a  At  Lyon,  at  Antwerp,  and  in  other  towns 
the  market  place  was  called  change  (exchange) ,  estrade, 
loge,  college,  or  bourse.  A  number  of  cities  actually  have 
each  a  rue  de  la  Loge  (market  street) ,  the  name  coming 
from  the  fact  that  the  street  led  to  the  market  place. 

(4)  The  Bourse  of  Paris  existed  fully  complete,  as  we 
have  seen  it,  as  early  as  in  the  reign  of  Philip  the  Fair 
(February,  1304);  it  was  situated,  as  we  have  said,  on 
Pont  au  Change  (Exchange  Bridge),  called  at  that  time 
the  Grand  Pont  (Great  Bridge) ,  near  the  Greve,  between 
the  great  arch  and  the  church  of  Saint-Leufroy.  At  a 
later  date,  it  was  transferred  to  the  large  court  of  the 
Palais  de  Justice,  beneath  the  Galerie  Dauphine  (Dauphin 
balcony),  near  the  prison;  thence  it  was  moved  to  the 
famous  street,  rue  Quincampoix,  afterwards  to  the  Place 
Vendome,  then  to  the  rue  Louis-le-Grand,  and  then  to 
the  Hotel  de  Soissons  (to-day  the  Bourse  de  Commerce), 
where  it  was  situated  when  it  was  closed  by  the  decree 
of  the  King's  Council,  October  25,  1720. 

September  24, 1724,  another  decree  of  the  King's  Council 
legally  instituted  the  Bourse  and  assigned  to  it,  as  an 
habitation,  the  Hotel  de  Nevers  (at  present  the  Bibliotheque 
Nationale).  It  was  situated  there  till  June  27,  1793, 
the  day  of  its  closing.  It  was  reestablished  on  May 
10,  1795,  in  the  Louvre  (on  the  ground  floor  beneath  the 
Galerie  d'Apollon — old  apartments  of  Anne  of  Austria, 
and  at  present  the  Musee  des  Antiques).  But  during  the 
interval  (from  1793  to  1795)  some  rather  heavy  specula- 
tions in  coin  and  assignats  ^were  carried  through  in  the 

«  From  the  Latin  cum  venire,  since  it  is  used  of  persons  assembling  and 
coming  together  from  various  places. 


118 


History    and   Methods   of  the   Paris    Bourse 

• 

Palais  Royal,  in  the  place  called  le  Perron;  that  is  to  say, 
where  rue  Vivienne  begins. 

Closed  on  the  9th  of  September,  1795,  the  Bourse  was 
opened  again  January  12,  1796,  and  established  in  VEglise 
des  Petits-Peres.  On  October  7,  1807,  it  was  transferred 
to  the  Palais  Royal  in  the  balcony  called  de  Virginie; 
thence,  on  March  23,  1818,  it  was  moved  to  the  grounds 
of  the  convent  of  the  Filles  Saint-Thomas,  on  the  site 
at  present  occupied  by  the  Chambre  de  Commerce  and  by 
the  buildings  adjacent  to  the  place  occupied  by  the  Bourse. 
The  entrance  was  through  rue  Feydeau,  facing  rue  de 
Montmorency. 

A  shed,  floored  with  boards  badly  joined  together, 
served  as  a  meeting  place  for  closing  speculations  which 
resulted  from  the  financial  contrivances  of  the  Government 
of  Louis  XVIII.  Finally,  on  November  6,  1826,  the 
building  at  present  known  as  the  Palais  de  la  Bourse  was 
inaugurated.  The  edifice  was  enlarged  in  1901,  and  the 
new  premises  were  opened  to  the  public  in  1903. 

(5)  The  economic  history  of  our  country  shows  to  a 
marked  degree  the  influence  of  the  perpetual  struggle  of 
the  guilds,  whether  it  was  against  individuals  who  were 
trespassing  on  their  privileges,  or  against  other  guilds 
who  were  in  competition  with  them.  This  constant 
struggle  was  the  inevitable  effect  of  the  organization  of 
labor  under  the  old  regime.  The  organization  of  labor, 
in  its  turn,  corresponded  to  the  general  conditions  of  the 
period.  "Each  province  or  even  each  canton  produced 
almost  all  the  things  necessary  for  its  own  consumption. 
The  fields  furnished  agricultural  products,  the  producers 
of  which  themselves  consumed  the  largest  share;  the 


119 


National    Monetary     Commission 

• 

industries  which  supplied  materials  for  clothing,  housing, 
and  the  manufacture  of  arms  and  utensils,  concentrated 
in  towns  and  cities  which  in  most  cases  were  fortified. 
The  natural  hindrances  of  distance  to  which  was  added 
the  lack  of  security,  in  thus  restricting  the  markets,  lim- 
ited them  to  local  producers  only.  For  that  reason  there 
resulted  a  kind  of  organization  of  industry  which  is  found 
in  the  oldest  societies,  in  Egypt,  in  Chaldea,  and  in  India, 
and  which  has  existed  up  to  modern  times — the  organiza- 
tion by  guilds  or  by  closed  castes. 

"The  serfs  or  subjects  of  a  seigniory,  who  had  acquired 
the  knowledge  of  a  trade,  obtained  from  their  lords  the 
right  of  plying  that  trade  for  their  own  benefit.  Thrown 
together  in  the  same  neighborhood,  in  the  same  section, 
in  the  same  street,  where  they  were  soon  forced  into 
competition,  it  did  not  take  them  long  to  learn  that  they 
would  find  it  to  their  advantage  to  combine,  in  order  to 
make  themselves  the  masters  of  prices;  for  thus  they 
might  raise  them  to  a  point  far  above  the  one  to  which 
they  were  compelled  by  competition  to  reduce  them."0 

Such  is,  in  short,  the  genesis  of  guilds. 

(6)  An  edict  of,  June,  1572  (under  Charles  IX),  raises  to 
office  "all  brokers  (courtiers)  who  at  the  present  time  are 
carrying  on  the  business  of  brokerage,  whether  it  be  in 
exchange  and  money;  or  in  silks,  woolens,  linens,  hides, 
and  other  kinds  of  merchandise;  or  in  wines,  corn,  and 
all  other  kinds  of  grain;  or  in  horses  and  all  other  cattle; 
provided  that  the  brokers  take  out,  in  two  months  from 
the  date  of  the  edict,  letters  of  commission  (lettres  de 
provisions) . ' ' 

aG.  de  Molinari.     Questions   economiqites,    1906,  Guillaumin  tditeur,  p. 
233  et  234. 


120 


History   and   Methods   of  the   Paris   Bourse 

This  edict  of  1572  shows  us  how  the  brokerage  of 
exchange,  practised  simultaneously  with  the  brokerage 
of  merchandise,  came  to  be  recognized  as  a  commission, 
that  is  to  say,  a  public  service.  There  were  in  France 
during  this  period  commissions  of  justice,  of  finance,  and 
of  war;  the  practice  of  purchasing  commissions  began 
under  Charles  VIII,  and  was  continued  by  his  successors. 

(7)  Although  the  brokers  had  certain  privileges,  religious 
dissensions  and  wars  were  not  over  favorable  to  the  prac- 
tice of  this  profession,  nor  to  the  respect  for  the  preroga- 
tives granted  to  those  who  pursued  it.  Accordingly,  in 
1595,  Henry  IV  renewed  the  edict  of  Charles  IX. 

The  edict  of  April  15,  1595,  prohibits  any  person,  at 
the  risk  of  corporal  punishment,  of  being  charged  with 
forgery,  and  of  being  compelled  to  pay  1,500  livres,  from 
performing  the  services  of  exchange  broker  (agent  de 
change)  or  merchandise  broker  (courtier),  before  having 
taken  letters  of  commission  from  the  King.  The  edict 
ends  thus: 

"It  is  not  to  be  understood,  however,  that  anyone  is 
compelled  to  employ  the  said  brokers  for  the  aforemen- 
tioned transactions,  if  it  does  not  seem  best  to  him  to 
do  so." 

Thus  a  principle  was  formulated  which  people  expressed 
in  the  following  saying:  " Ne  prend  courtier,  qui  ne  veut" 
(He  who  does  not  desire,  needs  no  broker  to  hire). 

The  broker  (courtier)  was  a  man  who  ran  (courait) ,  who 
sought  a  seller  for  a  purchaser,  or  a  purchaser  for  a  seller. 
When  the  first  laws  of  their  profession  were  being  formu- 
lated the  idea  did  not  occur  to  anyone  to  compel  sellers 


National    Monetary     Commission 

or  buyers,  who  were  in  a  position  to  transact  their  own 
affairs,  to  have  recourse  to  an  unnecessary  intermediary. 

But  it  happens,  that  the  question  of  commissions  was 
of  minor  importance,  as  compared  with  the  question  of 
money.  In  other  words,  when  the  King  created  commis- 
sions, he  made  them  yield  revenue.  This  system  was  in 
vogue  under  Francis  I,  and  was  extended  more  and  more 
under  the  reigns  of  his  successors.  We  see  what  is,  per- 
haps, its  extreme  development  under  Louis  XIV. 

Now,  every  corporation  which  pays,  demands  favors. 
Often  when  the  King  needs  money,  he  alters  the  statutes 
of  a  corporation,  takes  away  some  rights  formerly  granted, 
in  order  to  sell  them  again,  or  gives  to  it  some  new  ones 
for  ready  cash.  From  that  time  on,  it  will  be  seen,  the 
brokers  benefit  from  extensions  and  redemptions  of  privi- 
lege, corresponding  to  profitable  financial  transactions  on 
the  part  of  the  royal  exchequer. 

(8)  A  decree  of  the  King's  Council  of  May  17,  1598, 
explicitly  subordinates  to   the  exchequer  the  brokers  of 
exchange,    of  money,   of  cloths,  of  silk,  of  woolens,  of 
leather,  and  of  other  kinds  of  merchandise. 

(9)  It  is  in  1638  that,  by  a  decree  of  the  Council  of  the 
King,  the  name  "  agents  de  change  et  de  banque  "  (commis- 
sioners of  exchange  and  of  banking)   was  given  to  the 
exchange  brokers) . 

"  This  denomination,  for  which  the  Government  man- 
aged to  be  well  paid,0  did  not  deprive  them,  however,  of 
the  right  to  sell  merchandise.  The  separation  of  duties 
was  effected  a  good  deal  later. b 

a  Manuel  des  agents  de  change,  page  17,  note  2. 

&By  the  decree  of  the  King's  Council,  October  25,  1720. 


122 


History   and   Methods    of  the   Paris    Bourse 

At  that  time  the  agents  de  change  numbered  thirty. 
An  edict  of  February,  1645,  created  six  new  official 
brokers,  in  consideration  of  ready  cash. 

(10)  Up  to  that  time  the  exchange  broker  had  dealt  only 
in  precious  metals,  foreign  gold  pieces,  commercial  bills, 
and  merchandise.  But  in  1705  a  decree  of  the  King's 
Council  made  much  of  their  prerogative  as  negotiators  of 
certificates  of  loans  made  jointly  by  companies. 

The  edict  of  1705,  under  Louis  XIV,  was  issued  in  one 
of  the  most  unfortunate  periods  in  the  history  of  French 
institutions.  It  is  known  that,  after  Colbert,  the  King's 
extravagances  and  the  wars  placed  the  exchequer  in  such 
a  bad  plight  that  40,000  offices  were  sold  from  1691  to 
1709.  This  is  a  period  notorious  for  the  creation  of  the 
most  ludicrous  offices  that  can  be  imagined. 

By  this  edict,  the  King,  after  having  concluded  that  the 
present  offices  were  rather  cheap,  suppressed  all  the 
offices  of  exchange  brokers,  bank  brokers,  and  merchan- 
dise brokers  that  had  been  created  all  over  the  Kingdom. 
A  financial  reimbursement,  to  be  sure,  was  promised  them; 
but  it  was  only  a  promise,  and  was  never  fulfilled.  At 
the  same  time  that  the  King  decided  upon  the  abolition, 
he  announced  the  creation  of  116  new  offices  of  agents 
de  change,  20  of  which  were  for  Paris  and  the  others  for  the 
rest  of  France. 

"We  wish,"  says  the  decree,  "that  all  certificates  of 
loans  contracted  jointly  by  companies  should  be  nego- 
tiated through  the  agency  of  the  said  stockbrokers  and 
signed  by  one  of  them,  who  shall  certify  that  the  signatures 
are  valid,  in  default  of  which  we  prohibit  all  judges  from 
granting  judgment  against  those  who  have  signed  them,  in 
case,  at  maturity  of  said  bills,  payment  is  defaulted." 

123 


National    Monetary     Commission 

It  is  seen  that  the  agency  of  the  stockbrokers  (agents  de 
change)  is  obligatory  in  1705. 

It  appears  evident  that  the  maxim,  Ne  prend  courtier 
qui  ne  vent,  has  been  broken.  Negotiators  are  obliged  to 
have  recourse  to  a  stockbroker. 

This  great  favor  granted  to  stockbrokers  is  explained 
by  the  financial  scheme  which  the  King  is  now  hatching. 
The  old  stockbrokers  will  be  reimbursed  later,  but  in  the 
meantime  one  must  allure  other  brokers,  or  persuade  the 
old  ones  to  pay  new  sums  of  money. 

The  decree  of  1705  said:  "We  wish  that  all  certificates 
of  loans  made  by  companies  *  *  *  . "  Those  were  the 
first  obligations. 

What  in  fact  were  these  borrowing  companies?  It  is 
important  to  know  this,  for  the  history  of  brokers  and  of 
the  bourses  is  inseparable  from  the  history  of  public  and 
private  credit. 

SECOND   DIVISION. — General  observations  on  public  credit  under  the  old 

regime. 

(i  i)  Public  credit  must  be  considered  under  two  denomi- 
nations: Public  credit  properly  so  called,  made  up  of  loan 
securities  of  the  Government  or  of  artificial  persons  ema- 
nating from  the  Government,  and  the  credit  of  private 
institutions,  in  the  form  of  securities  issued  to  the  public 
by  special  companies. 

The  early  kings  obtained  their  ordinary  subsidies 
through  taxes,  the  enumeration  of  which,  and  the  ex- 
planation of  how  they  were  levied  and  administered, 
would  take  us  beyond  the  scope  of  our  subject. 

But  the  extraordinary  resources  of  the  early  kings  were 
obtained  by  processes  which  in  no  way  show — nay,  far 

124 


History   and   Methods   of  the   Paris    Bourse 

from  it — the  voluntary  consent  of  those  who  supplied 
them.  Public  credit  was  brought  into  being  by  the  ex- 
tortion of  the  Prince.  The  King  occasionally  would  ask  for 
assistance  from  his  faithful  subjects,  and  whether  one  was 
willing  or  not,  one  certainly  had  to  help  the  King.  Now 
and  then  (under  various  pretexts) ,  the  King  would  resort 
to  profitable  confiscations,  as  for  instance,  to  the  recoinage 
of  money,  or  even  its  debasement,  to  the  sale  of  offices 
and  of  titles  of  nobility,  and,  as  a  last  resort,  to  borrowing. 

To  the  "system"  of  the  sale  of  offices  there  was  added, 
in  a  similar  way,  the  loan-raising,  which  the  authorities 
awarded  in  lump  to  the  farmers  of  the  revenue  (traitants) . 
This  process  was  in  vogue  especially  in  the  seventeenth 
century.  The  contractors  became  rich,  but  their  profits 
were  merely  the  consequence  of  the  financial  regime  which 
resorted  to  their  cooperation.  Their  risks  were  very  great, 
for,  from  time  to  time,  there  were  some  awful  and  noisy 
law  suits  which  would  succeed  in  making  them  disgorge. 
Richelieu,  in  his  political  Testament,  speaks  of  the  restitu- 
tions which  each  court  of  justice  effected  to  the  advantage 
of  the  exchequer,  as  of  a  normal  and  regular  resource. 

The  insecurity  of  the  public  credit,  the  serious  troubles 
due  to  the  distress  of  the  royal  exchequer,  the  empirical 
and  often  spoliating  methods  by  which  it  was  sought  to 
remedy  these  troubles,  contributed  to  the  list  of  causes  of 
the  French  Revolution.  Moreover,  they  were  not  among 
the  least  potent. 

(12)  We  shall  pass  over  Dagobert  and  his  finance  min- 
ister, St.  Eloi;  wg  shall  likewise  pass  over  their  successors, 
in  order  to  make  special  mention  of  Philip  the  Fair,  the 
maker  of  bad  money. 

125 


National    Monetary     Commission 

Philip  the  Fair  established  an  unusual  tax  of  one  denier 
on  the  sale  of  all  goods.  People  called  this  tax  the  Maltote, 
the  bad  tax  (from  the  Latin  male,  bad,  and  toller e,  to  tax) . 
Jews,  Lombards,  and  Templars  suffered  from  his  exac- 
tions. His  methods  have  remained  famous. a  His  suc- 
cessors imitated  him,  and  from  time  to  time  they  con- 
demned their  superintendents.  Thus  died  Enguerrand  de 
Marigny,&  Ge*rard  de  la  Guette,  Pierre  Remy,  Jean  de 
Montaigu,  Pierre  des  Essarts,  in  order  that  the  King 
might  lay  hold  of  their  fortunes  which  they  acquired  more 
or  less  regularly  during  the  exercise  of  their  public  func- 
tions. King  Charles  VII,  who  was  as  much  a  maker  of 
bad  money  as  was  Philip  the  Fair,  imprisoned  his  Minister 
of  Finance,  Jacques  Coeurc  and  Francois  I  had  Superin- 
tendent Semblancay  hanged. 

"Vide,  Ch.  Gomel.  Les  causes  financieres  de  la  Revolution  franfaise, 
Paris,  1842. 

&  Marigny,  chamberlain  and  treasurer  to  Philip  the  Fair,  had  doubtless 
drawn  up  or  inspired  the  splendid  ordinance  enfranchising  the  serfs,  in 
which  are  found  those  beautiful  words — a  daring  declaration  of  war  to  the 
lords:  "  Inasmuch  as  every  human  being  is  free  by  natural  right,  and  inasmuch 
as  this  liberty  is  blotted  out  by  abhorrent  servitude,  to  such  an  extent  that 
living  men  and  women  are  treated  as  if  dead,  and  at  the  end  of  their  dreary 
and  wretched  lives  can  neither  dispose  of  nor  bequeath  the  goods  which  God 
has  granted  them  during  their  life  in  this  world,  .  .  ."  This  was  a  chal- 
lenge. He  paid  for  it  with  his  life.  Accused  of  the  most  diverse  crimes — 
of  having  embezzled  the  exchequer,  of  having  stolen  30,000  livres  from 
the  pope's  deniers,  of  having  had  his  statue  placed  in  the  palace  near 
those  of  the  kings,  and,  to  cap  the  climax,  of  being  devoted  to  witchcraft — 
he  was  dragged  from  the  dungeons  of  the  Louvre  to  those  of  the  Temple, 
then  to  those  of  Vincennes,  and  condemned,  without  having  been  given  a 
hearing,  and  hanged  at  Montfaucon,  on  the  gallows  for  thieves,  on  the  Wed- 
nesday, Eve  of  Ascension,  of  1315. 

c  Jacques  Coeur,  born  at  Bourges  about  1400,  was  a  prominent  merchant. 
Minister  of  Finance  to  Charles  VII,  he  was  the  King's  creditor,  which 
resulted  in  his  downfall.  Confined  in  Beaucaire,  lie  succeeded  in  running 
away,  and  enlisted  in  the  service  of  Pope  Calixtus  III.  In  the  history  of  the 
city  of  Montpellier  by  Charles  d'Aigrefeuille,  Doctor  of  Theology,  Canon  in 


126 


History   and   Methods    of  the   Paris    Bourse 

We  know  the  lines  of  Clement  Marot: 

"Lorsquea  Maillard  juge  d'enfer,  menait 
A  Montfaucon  Semblancay  1'ame  rendre, 

A  votre  avis,  lequel  des  deux  tenait 

Meilleur  maintien?     Pour  vous  le  faire  entendre, 
Maillard  semblait  homme  que  mort  va  prendre, 

Et  Semblancay  fut  si  ferme  vieillard 
Que  Ton  cuidait  partout  qu'il  menait  pendre 

A  Montfaucon  le  Lieutenant  Maillard." 

the  Cathedral  of  St.  Pierre  (Montpellier  MDCCXXXVII,  at  the  printing 
house  of  Jean  Martel,  royal  printer),  the  following  statements  are  found: 
"  Opportunity  was  taken  of  every  public  office  which  he  had  held  to  accuse 
him  of  various  frauds;  it  was  said  that  as  chancellor  of  the  exchequer  he 
had  committed  many  embezzlements  in  Languedoc.  It  was  claimed  that, 
as  director  of  the  mint,  he  was  guilty  of  having  coined  silver  pieces  known 
as  Gros  de  Jacques  Coeur,  on  which  he  made  exorbitant  profits,  and,  because 
he  conducted  a  large  business  in  the  East,  he  was  accused  of  having  made 
transportations  of  gold  and  silver  to  places  outside  of  the  kingdom  and  of 
having  furnished  arms  to  the  Turks  in  Alexandria.  Here,  also  (so  the  state- 
ment goes),  one  of  his  galleys,  called  the  St.  Denis,  took  on  board  a  Saracen 
child  who  wished  to  become  a  Christian;  and  the  Patron,  Michalet,  a  dyer, 
brought  it  to  Montpellier,  whence  Jacques  Coeur,  from  fear  that  his  galleys 
would  suffer  as  a  consequence,  had  the  child  brought  back  to  Turkey  and 
returned  to  its  master,  where  it  again  renounced  its  faith. 

"  Upon  these  accusations  he  was  arrested  at  Taillebourg,  transferred  from 
there  to  Montils  les  Tours,  where  he  was  condemned  to  pay,  as  a  fine, 
100,000  crowns  to  the  people  .whom  he  had  oppressed,  and  300,000  to  the 
King;  the  penalty  of  death  was  changed  to  that  of  a  public  apology,  and  of 
imprisonment  until  the  entire  payment  of  the  aforesaid  sums  would  be 
made;  after  this  he  was  to  be  banished  from  the  kingdom,  declared  unfit 
to  hold  any  public  office,  and  all  his  property  was  to  be  confiscated. 

"The  years  1454  and  1455  contain  nothing  of  note  to  our  city  of  Mont- 
pellier; but  in  the  following  year,  1456,  King  Charles  VII  made  an  extraordi- 
nary gift  to  the  merchants  of  this  city,  by  granting  them  the  lodge  which 
Jacques  Coeur  had  caused  to  be  built  there,  at  the  cost  of  1,869  Hvres  13 
sous  and  4  deniers.  This  piece  of  work  is  still  perfect,  as  if  it  has  just  come 
out  from  the  hand  of  the  maker,  without  a  single  stone  having  been  changed. 
Ornaments  were  not  spared  there;  and  the  chemists  who  wrote  so  much 
about  the  wonders  of  the  philosopher's  stone  took  advantage  of  the  puz- 
zling figures  which  are  to  be  seen  there  to  persuade  us  that  Jacques  Coeur 
knew  the  secret  of  making  gold." 

There  is  still  at  Montpellier  a  street  by  the  name  of  "jue  de  la  Loge." 

°When  Maillard,  Judge  of  Hell,  conducted  Semblancay  to  Montfaucon 
to  take  his  soul,  which  of  the  two,  in  your  opinion,  carried  himself  the  bet- 

9  127 


National     Monetary     Commission 

Jacques  Cceur  and  Semblancay  promoted  the  sciences 
and  deserve  the  gratitude  of  the  poets,  as  later  Fouquet 
deserved  the  gratitude  of  the  good  La  Fontaine.0 

(13)  Francois  I  is  considered  to  be  the  originator  of  our 
system  of  the  public  debt.     It  is  to  him  that  the  creation 
of  the  perpetual  rente  dates  back.6 

These  are  the  rentes  de  VHotel  de  Ville  (rentes  of  the 
town  hall). 

(14)  Under  Francois  II,  under  Charles  IX,  and  under 
Henry   III,   the  religious  wars,   the   dissipations   of  the 
court,    and  the   squanderings  of   the   courtesans   almost 
each  year  necessitated  the  establishment  of  rentes,0  the 
rate  of  which  varied  from  the  "denier  twelve"   to  the 
"denier  seventeen"  (du  denier  douze  au  denier  dix-sepf).d 

At  the  begining  of  the  reign  of  Henry  IV  the  debt  was 
enormous.  Agriculture  and  commerce  had  been  ruined 
by  the  religious  wars.  Out  of  150,000,000  livres  in  taxes, 
there  hardly  came  in  30,000,000  livres,  and  after  the 
wretched  administration  of  Superintendent  d'O,  who  died 
in  1594,  the  King  asked  for  Sully 's  assistance;  the  debt 
which  at  the  beginning  of  his  reign  had  reached  337,620,252 
livres,  was  reduced  by  more  than  100,000,000  livres. 

ter?  So  as  to  inform  you,  Maillard  looked  as  one  whom  death  is  going  to 
take,  and  Semblanc ay  was  so  strong  an  old  man  that  it  was  everywhere 
thought  that  he  was  going  to  hang  at  Montfaucon  Lieutenant  Maillard. 

a  See  in  the  works  of  La  Fontaine,  L'£legie  aux  Nymphes  de  Vaux. 

&  Edict  of  October  10,  1522. 

cLe"on  Say.  Dictionnaire  des  Finances,  at  the  word  "  Dette  Publique" 
by  MM.  E.  de  Bray  and  Alfred  Neymarck. 

<*The  expression  "denier  douze"  signifies  that  for  every  twelve  deniers 
borrowed,  the  borrower  will  give  as  interest  one  denier.  A  loan  "  au 
denier  douze"  is  then  a  loan  at  8.33  per  cent.  A  loan  "au  denier  dix-sept" 
is  a  loan  at  5.883  per  cent.  A  loan  " au  denier  vingt"  is  a  loan  at  5  per  cent. 


128 


History   and   Methods   of  the   Paris    Bourse 

Under  Louis  XIII,  not  only  were  the  efforts  of  Richelieu 
inadequate  to  reduce  the  debt,  but  his  struggles  with 
foreign  countries  and  the  Protestants  considerably  in- 
creased it.a 

(15)  Under  Louis  XIV,  up  to  the  time  of  Colbert,  public 
credit  continued  to  be  in  a  bad  condition.  After  the 
disgrace  of  Fouquet,  Colbert  tried  by  several  means  to 
restore  it,  only  a  few  of  which  will  be  mentioned. 

Nicolas  Fouquet,  born  1605,  after  having  bought  the 
office  of  attorney-general  at  the  Parlement  de  Paris  (a 
higher  court  of  justice),  obtained  the  superintendence  of 
the  finances,  thanks  to  Mazarin  to  whom  he  had  remained 
faithful  during  the  Fronde.  The  treasury  was  empty,  and 
the  duties  of  the  superintendent  became  encumbered  with 
those  of  the  trouveur  d' argent  (money  finder).6  The  loans 
were  so  onerous  that  an  issue  in  1658  of  400,000  livres  of 
rentes,  representing  a  loan  of  7,200,000  livres,  brought 
back  an  actual  return  of  i  ,200,000  livres,  on  which  the  cost 
of  administration  was  400,000  livres.  If  it  is  true  that 
Fouquet  was  rich  prior  to  his  term  of  office,  then  it  is  cer- 
tainly true  that  he  became  fabulously  rich  while  in  office. 

Louis  XIV  paid  Fouquet  the  remarkable  honor  of  ac- 
cepting an  invitation  to  the  Chateau  de  Vaux,  a  splendid 
palace,  costing,  according  to  Voltaire  18,000,000  livres. 
Innumerable  invitations,  says  Voltaire,  were  sent  out  to 
all  parts  of  France  and  Europe,  and,  on  August  17,  1661, 
thousands  of  splendid  carriages  swarmed  the  road  from 
Paris  to  Melun.  The  King,  the  Queen  mother,  Monsieur 
and  Madame,  and  the  entire  court  were  not  so  much 

a  Leon  Say.  Dictionnaire  des  Finances,  under  the  word  "  Dette  Pu- 
blique." 

&  Lavisse,  Histoire  de  France,  t.  7,  p.  80. 

129 


National     Monetary     Commission 

dazzled  as  shocked  by  this  fabulous  fete,  which  surpassed 
a  hundredfold  what  the  Sovereign  himself  could  at  that 
time  have  given.  All  the  details  contributed  to  this 
feeling:  the  comedy  Les  Fdcheux,  improvised  by  Moliere 
on  a  signal  from  the  castle  keeper,  and  presented  in  the 
park  at  the  lower  end  of  the  alley  of  firs;  the  gardens, 
the  waters,  the  ballet,  the  fireworks,  the  statues,  the  bronze 
figures,  the  furniture,  the  scenic  effects,  and  the  supper 
service  of  massive  gold.  The  Queen  mother  could  hardly 
restrain  her  son  from  having  the  Superintendent  arrested 
on  that  very  night,  in  the  very  place  which,  by  itself, 
was  evidence  of  his  embezzlements. 

Eighteen  days  had  hardly  elapsed,  when,  as  soon  as 
the  King  was  on  his  way  to  Nantes  in  order  there  to  inspect 
the  States  of  Brittany,  Fouquet  was  arrested,  September 
5,  in  coming  out  from  the  Council  sitting,  by  d'Artagnan, 
captain  of  the  musketeers.  He  was  brought  to  the  castle 
at  Angers,  then  in  turn  to  Amboise,  Vincennes,  Moret, 
and  lastly  to  the  Bastille,  where  he  was  immured  June 
1 8,  1663.  Fouquet,  in  spite  of  his  protests,  was  tried, 
not  by  the  Parlement  de  Paris,  but  by  a  special  court  of 
justice  (Chambre  de  justice),  instituted  by  an  edict  of  1661 ; 
it  assembled  at  the  arsenal,  and  was  composed  of  Sequier, 
the  chancellor,  de  Lamoignon,  the  first  president,  and  of 
twenty-two  members  chosen  from  every  Parlement  (higher 
court)  in  the  kingdom.  Nine  voted  in  favor  of  death, 
and  thirteen  for  exile  and  confiscation  of  property;  the 
King,  who  felt  much  provoked,  increased  the  penalty  to 
life  imprisonment.  Sentence  was  pronounced  December 
20,  1664,  and  three  days  later  the  unfortunate  Fouquet, 
atoning  for  his  malversations  ''which  had  been  nothing 

130 


History   and   Methods   of  the   Paris    Bourse 

more  than  pomp  and  generosity,  "  departed  for  the  fortress 
de  Pignerol,  where  he  arrived  January  10,  1665,  and  where 
he  was  destined  to  die  March  23,  1680,  after  fifteen  years 
of  strict  captivity.0 

(16)  The  Chambre  de  justice  which  had  heard  and  con- 
demned Fouquet,  tried  more  than  five  hundred  cases  for 
embezzlement.     They    examined,    going    back    to    1635, 
every  loan  transacted,  and  reduced  the  interest  on  each. 
Public  credit  suffered  considerably  as  a  consequence;  but 
this  consideration  did  not  in  the  least  restrain  Colbert, 
who  was  thoroughly  convinced  that  there  was  absolutely 
no  occasion  for  borrowing.     Frauds  in  connection  with 
the  taxes  were  mercilessly  followed  up.     "  Forty  thousand 
treacherous  nobles  deposit  at  the   treasury  taxes   which 
they  have  unlawfully  evaded.     The  prisons  are  overflowing 
with  farmers  of  the  revenue,  and  the  most  guilty  ones  are 
being  hanged ;  others  have  been  freed  only  upon  payment 
of  a  large  ransom.     This  period  is  known  under  the  name 
Terreur  de  Colbert."* 

In  four  years  Colbert  raised  the  net  revenue  from  about 
22,000,000  to  almost  37,000,000  livres.  But  the  lavishness 
of  his  master,  the  King,  very  soon  put  to  naught  the 
results  of  the  wise  financial  policy  of  Colbert. 

(17)  It  is,  of  course,  known  that  after  the  death  of  Colbert 
(1688),    the   superintendency   went   over   to    Claude    I^e 
Peletier,  who,  in  turn,  was  succeeded  by  Pontchartrain. 
The  latter  with  great  difficulty  began  some  operations 
for  credit,  the  most  important  of  which  were  issues  of 
rentes.     But  credit  was  dead.     There  was,  so  to  speak, 

a  De  Me"norval,  Paris  depuis  ses  origines  jusqu'a  nos  jours,  3*  partie,  p.  339. 
b  J.  M.  Fachan,  Historique  de  la  Rente  franqaise,  p.  32. 


National    Monetary     Commission 

no  public  market  for  royal  securities.  They  were  reputed 
to  be  intransferable,  and  it  was  not  considered  legitimate 
that  the  security  be  negotiated  for  less  than  its  face  value. 
It  was  only  some  time  later,  at  the  beginning  of  the  eight- 
eenth century,  that  transactions  in  royal  bonds  began  to 
take  place  on  the  bourse. 

The  decline  of  public  credit  gave  rise  to  the  utilization 
of  special  methods  for  stimulating  it.  In  1689,  Pontchar- 
train  resorted  to  an  issue  of  tontine0  life  annuities,  aggre- 
gating 1,400,000  livres.  The  operation  succeeded  and 
was  successfully  resorted  to  again  in  1696. 

Simultaneously  with  the  issue  of  the  tontines  (from  the 
name  of  their  inventor,  the  Italian  financier  Tonti) ,  issues 
of  lotteries  were  brought  into  fashion  in  France  by  Italian 
financiers  who  had  come  over  in  the  retinue  of  Catherine 
de  Medicis.  It  is  under  Louis  XIV  that  they  appear  in 
all  kinds  of  forms — benefit  lotteries,  special  and  commer- 
cial lotteries,  charity  lotteries,  government  lotteries,  etc. 

(18)  It  was  quite  necessary,  besides,  to  resort  to  sales 
of  offices,  and  it  is  during  the  reign  of  Louis  XIV  that  the 
most  peculiar  offices  are  created.  "Sir,"  said  Pontchar- 
train,  "every  time  that  Your  Majesty  creates  an  office 
God  creates  a  fool  to  buy  it."  Every  imaginable  con- 
trivance was  utilized  not  only  by  Pontchartrain,  but  by 
his  successors,  de  Chamillard  and  Desmarets.  But  dur- 
ing the  latter  part  of  the  King's  reign,  royal  loans  bene- 
fited very  much  from  the  assistance  of  Samuel  Bernard, 
financier,  who  was  money  lender,  speculator,  and  inti- 
mate adviser  of  the  King. 

a  The  tontine  principle  consists  in  dividing  the  part  of  the  benefits  of 
the  dying  to  the  survivors,  until  the  last  one,  at  whose  death  the  rente  goes 
over  to  the  State. 

132 


History   and   Methods   of  the   Paris    Bourse 

In  the  system  of  the  organization  of  offices  the  increas- 
ing of  salaries  played  a  large  part.  The  salaries  were 
the  stipend  given  by  the  King  to  the  officer.  This  sti- 
pend was  generally  the  interest  on  the  money  which  had 
been  paid  for  the  office.  The  King  allowed  an  increase  in 
salary,  provided  an  increase  in  money  be  given  to  him. 
It  was  not  a  disguised  loan,  but  a  forced  one,  for  if  the 
officer  could  not  pay,  some  other  person  desirous  of  get- 
ting such  an  office  could  be  found;  then  the  old  holder 
of  the  office  would  be  reimbursed,  unless  both  were 
allowed  to  continue  in  office  together,  in  which  event 
numerous  difficulties  had  to  be  faced.  From  1689  the 
practice  of  increasing  salaries  was  much  in  vogue.  The 
most  important  offices  in  the  kingdom,  those  which  re- 
quired learning  and  skill,  were  made  hereditary.  The 
judiciary  bodies,  the  parlements,  the  chamber  of  accounts, 
and  all  assistants  were  one  way  or  another  for  sale  at 
auction.  The  same  was  true  also  of  municipal  offices. 
The  industrial  and  commercial  professions  were  monop- 
olized under  the  most  peculiar  conditions.  Stackers  of 
wood,  testers  of  salted  butter,  inspectors  of  wigs,  overseers 
of  the  roast. meats,  examiners  of  pigs'  tongues,  searchers 
of  fresh  butter,  testers  of  cheese — all  these  were  govern- 
ment officers.  The  King,  "who  is  anxious  that  abun- 
dance should  reign  in  his  good  town  of  Paris,  has  noticed 
that  three  or  four  individuals  have  so  monopolized  the 
oyster  business  that  his  subjects  can  get  only  as  much  as 
it  seems  proper  to  the  oyster  merchants  to  sell."  And 
the  King  makes  officers  of  caterers  or  sellers  of  oysters. 

(19)  It  is  now  in  place  to  pass  to  the  public  credit  which 
was  established  by  private  companies  with  or  without  gov- 

133 


National    Monetary     Commission 

ernment  aid.  We  shall  see  how  the  share  and  the  bond 
assume  their  form. 

The  ancients  seem  to  have  been  unacquainted  with 
associations  having  their  capital  divided  into  shares. 
Greek  authors  very  rarely  referred  to  associations  of  more 
than  three  or  four  persons,  and  we  can  with  reasonable 
certainty  advance  the  opinion  that  shares  never  existed 
in  Greece.  As  regards  the  Romans,  the  question  is  more 
difficult,  for  they  had  vast  companies,  notably  the  socie- 
tates  vectigalium  publicorum,  whose  object  was  the  exploi- 
tation of  the  farming  of  the  tax.  According  to  certain 
commentators,  notably  Orelli  and  Becker,  these  com- 
panies had  been  formed  on  the  basis  of  shares.  However, 
if  some  transferable  parts  were  ever  provided  for  in  any 
of  these  companies,  it  is  very  probable  that  it  was  done 
only  exceptionally  and  without  modifying  their  general 
character.0 

At  Toulouse  there  was  a  mill,  named  du  Basacle,  which 
was  given  in  the  twelfth  century  by  the  prior  of  la  Daurade 
to  a  company,  the  members  of  which  were  known  as 
pairiers,  whose  parts,  real  transferable  shares,  did  not 
entail  the  personal  responsibility  of  the  holders. 

Some  stock  companies  were  in  existence  in  Italy  and 
Germany  at  quite  a  remote  period;  among  them  we  find 
the  Bank  of  St.  George,  at  Genoa,  which  best  displayed 
the  general  traits  of  the  stock  company.  In  1407  it  was 
reestablished  with  a  capital  divided  into  20,400  shares, 
according  to  information  given  by  Scaccia.  .All  were 
of  equal  value,  carrying  no  personal  responsibility  and 
withholding  from  the  members  the  privilege  of  negotia- 

a  See  Ed.  Guillard.     Les  operations  de  bourse,  p.  12. 
134 


History   and   Methods   of  the   Paris   Bourse 

tion.  There  was  a  general  assembly  and  a  board  of 
supervision. 

At  the  beginning  of  the  seventeenth  century  all  civilized 
nations  of  Europe  are  acquainted  with  the  principle  of 
share  holding.  In  1602  there  is  instituted  in  Holland  the 
Netherland  East-Indian  Company.  In  England  a  similar 
company  is  established  in  1613. 

Under  the  old  regime,  maritime  commerce  was  not  con- 
ducted under  the  same  conditions  as  it  is  conducted  to- 
day. The  reasons  for  it  are  obvious.  It  presented  at 
that  time  too  many  perils  and  entailed  too  many  expenses 
for  individuals  to  be  able  to  engage  in  it.  Therefore 
licensed  companies  were  organized  upon  which,  in  ex- 
change for  great  advantages  and  an. exclusive  monopoly, 
quite  onerous  conditions  were  imposed. 

"  Henry  IV,  intending  to  follow  the  example  of  the  Dutch 
in  the  Far  East,  authorized  in  1603  a  certain  Gerard  de  Roy 
to  form  a  company  which,  being  granted  a  monopoly  for 
fifteen  years,  should  take  in  hand  the  trade  with  the  East 
Indies.  But  the  Provinces  unies  (United  Territories)  pointed 
out  to  him  the  harm  this  company  would  do  their  company 
of  the  East  Indies  (established  March  20, 1602) ,  and  induced 
him  to  turn  his  endeavors  to  the  West  Indies.  Henry  IV 
later  returned,  but  without  success,  to  the  project  of  the 
East-Indian  Company.  Amsterdam  watched  over  its 
monopoly  on  spices."  a 

(20)  Under  I^ouis  XIII  Richelieu  took  this  idea  up  again, 
which,  to  be  sure,  had  never  been  abandoned.  In  1625 
there  was  founded  the  company  du  Morbihan  for  com- 

a  Ernest  Lavisse.  Histoire  de  France  depuis  ses  origines  jusqu'a  la 
Revolution,  T.  VI-II,  p.  82. 


135 


National    Monetary     Commission 

merce  with  New  France,  Moscow,  Norway,  Sweden,  and 
Hamburg;  the  company  de  la  Nacelle  de  Saint-Pierre 
Fleurdelysee,  for  negotiating  and  transacting  business  in 
all  countries  not  hostile  to  the  crown;  the  company  des 
Cent  associes  (of  one  hundred  partners) ,  for  colonizing  New 
France  (Canada) ;  and  some  others — notably,  two  com- 
panies, for  trading  with  the  East  Indies.  Because  of  lack 
of  funds  all  of  these  companies  went  to  ruin. 

The  failure  of  these  companies  is  the  characteristic 
event  in  the  colonial  and  commercial  history  of  the  reigns 
of  Henry  IV  and  Louis  XIII.  The  companies  in  turn 
disappear,  reappear,  and  vegetate.  Outside  of  the  reli- 
gious world  the  colonies  were  not  popular.  The  French  at 
that  time  were  a  saving  people,  modest  in  their  tastes, 
and  leading  a  stay-at-home  life,  and  preferring,  as  Mont- 
chretien  has  already  remarked  in  his  Traite  d'Economie 
Politique  (1615),  to  live  sparingly  at  home  in  any  employ- 
ment, than  to  seek  fortunes  in  the  colonies  or  in  a  foreign 
country. 

(21)  Under  Louis  XIV,  thanks  to  the  influence  of  Col- 
bert, there  were  established  (i)  the  West-Indian  Company 
(des  Indes  Occidentales) ,  started  in  1664,  which  alone  had 
the  right  to  do  business  in  our  settlements  in  North 
America,  the  Antilles,  Guiana,  and  Senegal;  it  had  its 
center  in  Le  Havre;  (2)  the  East-Indian  Company  (des 
Indes  Orientates),  started  in  1664  °  which  had  the  monop- 

a  In  the  History  of  France  by  M.  Ernest  Lavisse,  T.  VI-I,  pp.  238-239, 
are  found  interesting  details  about  the  formation  of  the  East  Indian  Com- 
pany. The  beautiful  and  costly  armorial  emblems  presented  to  the  com- 
pany on  the  day  of  the  granting  of  its  privilege,  the  grand  advertising  of  the 
affair,  and  the  great  enthusiasm  displayed,  under  the  influence  of  Colbert, 
by  the  King,  the  Queen,  the  official  world,  judges  and  prominent  civilians, 
both  in  subscribing  themselves  and  in  exhorting  others  to  subscribe  to  the 
funds  of  the  company,  are  described  in  a  lively  and  fascinating  style. 

136 


History   and   Methods   of  the   Paris    Bourse 

oly  of  commerce  over  the  broad  ocean  from  the  Cape  of 
Good  Hope  to  the  Strait  of  Magellan,  thus  including  our 
settlements  in  Madagascar,  in  the  Isles  of  France  and  of 
Bourbon,  and  in  Hindostan;  it  had  its  center  at  Lorient; 

(3)  the  company  du  Levant  (of  the  Levant),  started  in 
1670,  which  contended  with  Venice,  England,  and  Holland 
for  the  trade  with  Turkey,  Asia-Minor,  Syria,  Egypt,  and 
the  Barbary  States — it  had  its  center  at  Marseille;   and 

(4)  the  company  du  Nord  (of  the  North),  started  in  1669, 
which  traded,  but  without  exclusive  rights,  with  Holland, 
Northern    Germany,    Sweden,     Denmark,    Russia,    and 
Poland;  it  had  its  center  in  Dunkirk. 

The  first  two  of  these  companies  exercised  complete 
royal  authority  over  the  colonies  already  founded  or  to  be 
founded.  They  installed  governors  and  judges,  had  the 
right  of  peace  and  war  in  their  relationships  with  the 
natives,  and  flew  the  white  colors  on  their  ships.  They 
enjoyed  the  sovereign  authority  similar  to  that  which  the 
English  company  in  the  Indies  exercised  over  all  Hindo- 
stan up  until  the  mutiny  of  1857. 

The  company  des  Indes  Occidentales  disappeared  in 
1674;  from  its  remains  were  formed  the  companies  du 
Senegal,  de  la  Guinee,  d'Acadie,  du  Canada,  de  la  baie 
d'Hudson,  de  Saint- Domingue,  and  especially  the  company 
du  Mississippi,  so  famous  during  the  period  of  the  financial 
policies  of  I/aw.  The  company  du  Nord  succumbed  about 
1 67  2;  the  company  du  Levant  in  1690;  the  company  des 
Indes  Orientates  lingered  on  till  1718.  From  a  part  of  its 
possessions  was  formed,  twice  (in  1700  and  171 2),  the  com- 
pany of  China  (de  la  Chine) .  When  one  of  these  companies 
dissolved,  the  colonies  again  became  directly  responsible 


137 


National    Monetary     Commission 

to  the  king,  and  once  more  commerce  was  free  for  indi- 
viduals. In  1719  the  company  des  Indes  was  reconsti- 
tuted. 

(22)  John  Law,  by  letters  patent  of  May  2,  1716,  pro- 
cured the  privilege  of  establishing  a  bank.  It  was  called 
Banque  Generate,  and  had  a  capital  of  6,000,000  livres, 
divided  into  1,200  shares  of  5,000  livres  each. 

The  5,000  livres  were  to  be  paid  in  as  follows:  A  fourth, 
1,250  livres,  in  specie,  and  the  remaining  three-fourths 
in  government  notes.  The  government  notes  were  the 
result  of  a  loan  of  250,000,000  livres  at  4  per  cent,  pre- 
viously issued  by  the  Regent's  Government;  the  loan  had 
met  with  only  middling  success,  and  it  was  not  long  before 
the  notes  lost  four-fifths  of  their  value.  This  ability 
of  the  subscribers  to  pay  for  their  shares  in  government 
notes  explains  the  favor  which  Law  gains  in  the  eyes  of 
the  Regent.  It  did  not  take  long  before  the  Banque  Gen- 
erate was  transformed  into  the  Banque  Royale. 

Toward  the  end  of  August,  1717,  a  trader,  Crozat,  had 
procured  a  license  to  do  business  in  Louisiana.  Crozat 
granted  the  license  to  Law,  who  formed  a  company  under 
the  name  Compagnie  d'Occident,  having  a  capital  of 
100,000,000  livres  payable  in  government  notes;  various 
monopolies  were  conceded  to  this  company,  notably  the 
monopoly  of  tobacco. 

Soon  after  Minister  d'Argenson  had  granted  the  lease  of 
the  imposts  and  duties  to  the  Paris  Brothers,  who  had 
formed  a  stock  company  with  this  lease  as  a  basis,  Law 
succeeded  in  having  the  Banque  Generate  declared  Banque 
Royale,  and  in  amalgamating  all  the  trading  companies 


138 


History    and   Methods   of  the   Paris    Bourse 

which  existed  at  that  time  with  the  company  d'Occident. 
The  new  company  was  called  Compagnie  des  Indes. 

This  company,  having  become  very  wealthy,  was  instru- 
mental in  causing  the  withdrawal  of  the  lease  of  the 
imposts  and  duties  from  the  Paris  Brothers  and  the  trans- 
fer of  the  grant  to  itself.  The  series  of  policies  which  had 
been  put  into  practice  at  this  occasion  was  given  the  name 
of  Law's  System. 

At  the  end  of  October,  1719,  Law  issued  in  securities 
"to  bearer,"  300,000  shares  of  the  company  des  Indes, 
at  the  prevailing  price  of  5,000  livres  each.  (To  Law, 
as  originator,  is  due  this  form  of  security.)  The  pro- 
ceeds of  this  issue  were  to  be  a  billion  and  a  half  livres, 
which  the  company  des  Indes  was  supposed  to  loan  to 
the  Government  at  the  rate  of  3  per  cent.  The  State 
owed  him,  then,  for  this  principal  an  annual  interest 
of  45,000,000  livres.  On  the  other  hand,  however,  Law 
owed  the  State  the  price  of  the  lease  of  the  duties  and 
imposts,  which  amounted  to  52,000,000. 

The  overtaxed  emissions  and  the  difficulties  experienced 
by  the  company  des  Indes  in  maintaining  the  shares  at 
a  high  price  led  to  their  fall.  The  bank  met  with  ruin 
in  repurchasing  its  own  shares.  The  intrigues  of  the 
Court  completed  Law's  doom.  In  May,  1720,  the  license 
was  withdrawn  from  the  bank,  and  Law  ran  away, 
completely  ruined.  He  died  in  misery  in  Venice,  1729. 

From  1716  to  1720  the  rue  Quincampoix  had  been  the 
scene  of  one  of  the  most  whimsical  frenzies  of  stock- 
jobbing which  has  ever  taken  hold  of  the  people.  The 
Court,  the  clergy,  and  the  town  gave  themselves  over 
to  the  most  stupid  speculations  in  securities  of  the  com- 


139 


National     M  o  n  et  ar  y     Commission 

pany  des  Indes.  Such  and  such  a  servant  became  mas- 
ter, and  by  habit  rode  behind  his  coach  instead  of  getting 
inside.  A  widow  by  the  name  of  La  Caumont  realized 
70,000,000  in  profits.  The  Duke  of  Bourbon  realized 
enormous  profits,  which  enabled  him  to  rebuild  the  castle 
of  Chantilly  with  a  royal  magnificence.  This  beautiful 
estate,  which  is  at  present  occupied  by  the  Institut  de 
France,  owes  much  of  its  splendor  to  the  speculations  let 
loose  by  John  Law. 

(23)  After  the  breakdown  of  Law's  policy,  it  was 
thought  necessary  in  some  way  to  reorganize  the  financial 
market,  which  had  fallen  into  extreme  disorder.  The 
financial  market  had  been,  to  a  certain  extent,  shaping 
itself  out  into  some  sort  of  anarchy.  An  ordinance  of 
March  22,  1720,  which  henceforth  prohibits  any  assembling 
in  the  rue  Quincampoix,  states  that  "several  dishonest 
dealers,  taking  advantage  of  the  tumult  and  confusion 
which  resulted  from  the  meeting  of  unknown  people,  a 
few  of  whom  were  even  without  residence  and  social  recog- 
nizance, have  often  embezzled  and  misappropriated  the 
property  of  those  who  have  had  opportunity  to  deal  with 
them;  that  a  large  number  of  servants  and  artisans  have 
left  their  masters  #nd  their  occupations,  either  themselves 
to  carry  on  transactions  or  to  help  and  act  as  broker  for 
other  people  who  did  not  dare  to  make  their  appear- 
ance." The  Government  goes  on  to  consider  that  the 
stockbrokers  (agents,  de  change)  will  assure  the  common- 
wealth against  the  return  of  the  excesses  which  took 
place,  forgetting  that  the  cause  of  those  excesses  was 
other  than  a  certain  organization  of  the  market,  and 
that  what  is  intended  henceforth  to  mitigate  speculation, 


140 


History   and   Methods   of  the   Paris    Bourse 

is  the  lack  of  nourishment,  the  complete  breakdown  of 
the  system,  its  crisis.  Another  ordinance  followed  a  few 
days  later  (March  28,  1720).  All  persons,  with  the  excep- 
tion of  stockbrokers,  are  prohibited  from  assembling  in 
any  place  or  section  whatsoever,  and  from  keeping  an 
office  for  the  negotiation  of  paper;  the  penalty  for  violat- 
ing this  law  is  imprisonment  or  3,000  livres  fine.  Specu- 
lators moved  away  and  established  themselves,  instead,  on 
Place  Louis -le-Gr and,  known  to-day  as  Place  Vendome. 
"  On  July  20,  1720,  a  royal  ordinance  orders  that  the  trans- 
actions of  shares  of  the  company  des  hides  and  the  nego- 
tiation of  bills  of  exchange  or  other  negotiable  certificates 
shall  be  carried  on  in  the  garden  of  the  Hotel  de  Soissons." 
The  Hotel  de  Soissons,  we  learn  from  the  Manuel  des 
agents  de  change,  was  situated  almost  exactly  in  the 
very  place  where  the  commercial  bourse  has  recently 
been  erected,  in  the  quartier  des  Holies.  The  entrance 
is  through  the  rue  des  Deux-Ecus.  On  August  30,  1720,  a 
decree  of  the  Council  of  State  suppresses  the  sixty  exist- 
ing offices  of  stockbrokers  created  by  the  edicts  of  the 
month  of  August,  1708,  and  of  November,  1714,  and 
orders  that  there  be  established  sixty  new  stockbrokers 
by  special  appointment.  By  article  9,  all  persons  are 
prohibited  from  meddling  with  the  duties  of  stockbrokers 
"on  penalty  of  paying  3,000  livres  fine,  and  even  of  im- 
prisonment and  greater  punishments,  if  servants,  appren- 
tices, workmen,  laborers,  or  Vagabonds  are  the  offending 
parties."  A  few  days  later,  however,  October  25,  1720, 
a  decree  of  the  Council  of  State  orders  also  the  shutting 
up  of  the  bourse  established  in  the  Hotel  de  Soissons, 
and  no  assemblage  is  allowed  anywhere  at  all. 


141 


National    Monetary     Commission 

Finally,  on  September  24,  1724,  another  decree  of  the 
Council  of  State,  in  its  first  article,  ordered  that  there  be 
immediately  established  in  the  city  of  Paris  a  place  called 
la  Bourse,  the  principal  entrance  to  which  shall  be  through 
rue  Vivienne. 

THIRD  DIVISION — The  decrees  of  the  Council  from  1724  to   1788 — The 
financial  market  on  the  eve  of  the  Revolution. 

(24)  From  1 724  to  1 788  a  series  of  decrees  of  the  Council 
led  to  the  modification  of  the  regime  of  the  Bourse. 

In  1724,  according  to  the  phraseology  of  the  decree  of 
the  Council  of  September  24,  recourse  to  the  agency  of 
stockbrokers  was  strictly  obligatory  for  the  negotiation 
of  royal  bills  and  negotiable  paper. 

In  January,  1723,  there  were  created  60  offices  of  stock- 
brokers, and  the  report  was  spread  that  those  who  wished 
to  take  up  the  offices,  that  is  to  say,  to  declare  them- 
selves purchasers,  would  have  to  pay  in  a  sum  of  money. 
To  insure  the  buying  out  of  the  offices  created,  mention 
was  made  in  the  decree  of  1724  of  the  privileges  and 
advantages  attached  to  the  incumbents  of  these  offices. 
But  no  purchasers  appeared. 

The  decree  of  September  24,  1724,  was  then  revoked. 

The  decree  of  the  Council  of  State  of  February  26,  1726, 
ordered  that  the  business  of  negotiable  paper  and  other 
bills  be  made  more  free  on  the  Bourse.  Notwithstanding 
the  provisions  of  the  decree  of  September  24,  1724,  "all 
merchants,  traders,  bankers  and  others  who  have  been 
or  shall  be  admitted  to  the  Bourse,"  are,  by  the  terms 
of  the  new  decree,  allowed  to  deal  among  themselves  in 
shares  of  the  company  des  Indes,  and  in  other  securities 
and  negotiable  paper,  in  the  same  manner  as  bills  of 


142 


History    and   Methods   of  the   Paris    Bourse 

exchange,  bills  "to  bearer,"  promissory  notes,  and  mer- 
chandise are  dealt  in. 

(25)  In  1733  there  is  a  sudden  change.     Purchasers  of 
offices  begin  to  appear. 

The  decree  of  1726  is  revoked,  and  in  accordance  with 
the  decree  of  September  24,  1724,  the  King  orders  that 
transactions  in  shares  of  the  company  des  Indes  and  in 
other  securities  and  negotiable  papers  shall  be  made  only 
through  the  agency  of  two  stockbrokers. 

(26)  August  7,  1785,  a  new  decree  of  the  council  of  the 
King  is  issued: 

ART.  3.  "  His  Majesty  wishes  that,  in  accordance  with 
the  provisions  of  articles  17  and  18  of  the  decree  of  Sep- 
tember 24,  1724,  the  negotiation  of  royal  and  other 
public  securities  should  be  considered  to  be  valid  only 
when  stockbrokers  have  acted  as  intermediaries,  and  that 
such  negotiations  shall  take  place  nowhere  but  on  the 
Bourse,  where  the  price  of  the  securities  will  be  quoted, 
according  to  the  terms  of  the  regulations,  by  two  stock- 
brokers." Certain  specified  merchandise  brokers  are  also 
allowed  to  go  to  the  Bourse  and  to  negotiate  bills  of 
exchange  and  bills  "to  bearer." 

ART.  4.  Stockbrokers  must  not  list  on  the  Bourse  other 
than  royal  securities  and  the  price  of  exchange. 

ART.  5.  They  must  not  negotiate  royal  securities  or  other 
negotiable  paper  for  their  personal  account,  the  penalty 
being  removal  and  the  payment  of  a  fine  of  3,000  livres. 

ART.  7.  Time  bargains  in  royal  or  other  securities  with- 
out actual  delivery,  or  even  without  the  deposit  of  said 
securities  at  the  very  moment  of  the  signature  of  the 
contract,  are  declared  null  and  void. 

143 


National     Monetary     Commission 

ART.  8.  This  shall  not  be  interpreted  as  prejudicing  the 
right  of  merchants,  dealers,  bankers,  and  others  admitted 
to  the  Bourse,  to  deal  among  themselves  in  bills-of -exchange 
notes  "to  bearer"  or  "to  order,"  shares  of  the  new  com- 
pany des  Indes,  and  other  commercial  effects,  without  the 
mediation  of  stockbrokers. 

(27)  On  March  19,  1786,  a  royal  ordinance  raises  the 
number   of    stockbrokers    to    sixty,  thus    annulling    the 
decree  of  December  22,  1733,  which  had  diminished  their 
number  to  forty. 

(28)  On  July  14,  1787,  a  decree  of  the  Council  of  State 
withdraws  from  the  stockbrokers  the  monopoly  of  the 
negotiation  of  securities  other  than  royal  securities  and 
of  shares  of  la  Caisse  d'Escompte  (a  national  discount  bank 
established  by  Turgot  in  Paris  in  1776). 

(29)  But  on  June  10,  1788,  a  decree  of  the  Council  of 
State  renews  the  provisions  of  the  decree  of  1785  and  rati- 
fies a  resolution  of  the  stockbrokers,  in  which  they  declare 
that  they  will  waive   270,000  livres   in  annual  salaries 
attached  to  their  offices. 

It  can  be  seen  from  the  preceding  that  the  Govern- 
ment would  grant  privileges  to  the  stockbrokers  which 
it  would  later  withdraw  in  order  to  grant  them  again,  and 
somewhat  later  once  more  to  withdraw.  Thus,  in  1595, 
nobody  is  required  to  take  a  broker.  In  1705  it  is  dif- 
ferent. Individuals  must  resort  to  a  stockbroker  for  the 
negotiation  of  loan  certificates.  But  the  prescription  is  not 
observed.  A  decree  of  1724  reenforces  it.  It  is  repealed 
in  1726,  but  in  1733  a  return  to  the  principles  of  1724  is 
made.  In  1785  and  1786  the  monopoly  of  stockbrokers 
once  again  gains  more  power.  In  1787  it  is  diminished, 

144 


History    and   Methods   of  the   Paris    Bourse 

but  in  1788  the  stockbrokers  giving  up  the  interest  on 
their  security,  the  King  agrees  to  revert  to  the  principles 
laid  down  by  the  edicts  of  1785  and  1786. 

(30)  Let  us  rapidly  examine  the  condition  of  the  trans- 
ferable security  on  the  eve  of  the  Revolution. 

There  existed  royal  securities  (effets  royaux).  -They 
were  loan  certificates  issued  by  the  King,  rente  contracts, 
lottery  tickets,  and  exchange  notes. 

In  1785  there  existed  a  few  stock  companies.  The 
company  des  Indes  and  the  Caisse  d'Escompte  (Discount 
Bank)  were  the  best  known  among  them.  Then  came 
the  company  des  Eaux,  founded  by  the  Perier  brothers 
(ancestors  of  Casimir  Perier)  for  the  purpose  of  fur- 
nishing Parisians  with  water  from  the  Seine.  Mirabeau 
in  his  pamphlet  (Denonciation  de  I 'agiotage  au  roi  1788) 
cites  a  number  of  companies,  among  which  may  be  men- 
tioned the  Glass  Company  of  Saint  Gobain,  the  Rubber 
Company  of  Senegal,  and  several  fire-insurance  stock 
companies.  In  1789  the  transferable  securities  on  the 
Bourse  numbered  seventeen. 

(31)  Let  us  cast  a  glance  on  the  condition  of  govern- 
ment finances  on  the  eve  of  the  Revolution. 

When  Louis  XVI  gave  over  to  Calonne  the  manage- 
ment of  the  finances  (November  3,  1783),  there  was  a 
deficit  of  80,000,000  in  the  ordinary  budget,  and  there 
remained  580,000,000  of  debts  to  be  funded.a  The  new 
Controller-general  first  of  all  made  the  King  sign  an 
edict  authorizing  a  loan  of  100,000,000,  which  turned 
out  to  be  a  success.  Soon  after  he  undertook  a  loan  of 


«  Charles  Gomel,  Les  causes  financier es  de  la  Devolution  franQaise,  Paris, 
1893;  The  last  controllers-general,  p.  80. 


National    Monetary     Commissio 


n 


125,000,000.  The  administration  of  Louis  XVI  at  that 
time  had  already  borrowed  almost  1,200,000,000  livres.a 

The  expenses  increased  so  much  that  the  deficit  in 
1785  was  about  102,000,000,  and  the  expenses  of  that 
financial  year  which  remained  unpaid  were  72,000,000. 
The  decline  in  royal  securities  frightened  the  Minister. 
Besides,  the  public  took  up  the  stocks  of  a  Spanish  bank, 
la  Banque  de  Saint  Charles,  founded  in  1782  by  a  French 
financier,  Cabarrus.  The  extreme  fondness  which  cap- 
italists showed  for  it,  displeased  Calonne.  He  consid- 
ered it  bad  that  a  foreign  security  should  come  to  compete 
with  our  public  capital,  and  since  some  loan  securities 
issued  by  him  in  December  of  1784  were  about  to  take 
their  rank  among  other  securities,  Calonne  decided  to 
prohibit  by  an  edict  the  negotiation  in  France  of  foreign 
securities.  Mirabeau,  having  received  Calonne's  permis- 
sion and  financial  backing,  published  a  virulent  diatribe 
against  the  Banque  de  Saint  Charles  and  its  director, 
whom  Mirabeau  compared  to  Law,  and  whose  private  life 
he  had  the  indelicacy  to  attack.  The  stocks  fell  from 
750  livres  to  400  livres,  and  speculation,  which  the 
Government  switched  over  to  royal  securities,  increased. 

When  the  Government  wishes  people  to  speculate  in 
rentes,  the  phenomenon  has  always  been,  and  is  now, 
the  same.  It  intends  to  have  rentes  rise  on  the  market. 
If  they  fall  the  Government  does  not  hold  itself  respon- 
sible for  the  fall,  but  blames  those  who  have  suffered. 
Dealing  in  rentes  for  future  delivery,  which  at  that  time 
was  a  common  practice,  was  blamed  for  the  actions  of 
M.  de  Calonne. 

«  Charles  Gomel,  Les  causes  financidres  de  la  Revolution  franqaise,  Paris, 
1893,  p.  165. 

146 


History   and   Methods   of  the   Paris    Bourse 

"The  King  is  informed,"  says  the  preamble  to  the  de- 
cree of  the  Council  of  August  7,  1785,  "that  for  some 
time  there  has  existed  in  the  capital  a  kind  of  transaction 
or  mutual  agreement,  as  dangerous  to  sellers  as  to  buyers, 
by  which  one  party  engages  to  furnish,  on  long  terms, 
securities  which  he  does  not  possess,  and  the  other  party 
consents  to  pay  for  them  without  having  the  necessary 
funds." 

In  the  meantime  the  zeal  of  Calonne  had  taken  him  too 
far.  He  was  forced  by  many  complaints  and  the  exigen- 
cies of  the  Exchequer  to  change  his  tactics.  The  decree 
of  October  2,  1785,  mitigated  the  severities  of  the  pre- 
ceding decree.  By  a  decree  of  September  22,  1786,  Ca- 
lonne fixed  the  maximum  time  for  bargains  at  two  months. 
Calonne  noticed  that  when  certain  securities  rise  the 
prices  of  rentes  resist  all  causes  for  a  decline  which  are 
likely  to  affect  them.0 

The  example  of  England,  he  wrote  later  to  the  King, 
is  sufficient  proof  that  a  wise  government  should  be  pre- 
pared, when  the  time  requires  it,  to  maintain  by  secret  and 
indirect  methods  the  price  of  the  public  stocks,  and,  in 
time  of  need,  to  make  certain  sacrifices  to  raise  their  price. b 
This  operation  cost  the  Exchequer  14,600,000  livres.c 

a  Leon  Say :  Les  Interventions  du  Tresorala  bourse  depuis  cent  ans,  Annales 
de  I'Ecole  des  sciences  politiques.  Anne"e  1886,  pp.  6  a  9. 

&  Ch.  Gomel,  loc.  c.,  p.  254. 

c  It  is  at  this  period — 1787 — that  the  celebrated  speculations  of  the 
Abbe  d'Espagnac  took  place,  and  a  little  later  Mirabeau  published  his 
virulent  denunciation  of  stockjobbing.  Calonne  and  Necker  were  not 
spared  by  the  author.  The  pamphlet  cost  Mirabeau  ...  a  lettre  de  cachet 
ordering  his  arrest.  But  he  was  not  arrested,  Calonne  having  apprised  him 
through  the  Abbe  Perigord.  D'Espagnac  was  brought  before  the  revo- 
lutionary tribunal,  April  3,  1794,  condemned,  and  executed  the  same  day  on 
the  Place  de  la  Revolution. 


National     Monetary     Commission 

FOURTH  DIVISION. — The  financial  market  during  the  Revolution. 

(32)  The  Revolution  found  the  stockbroker's  profes- 
sion, as  well  as  a  number  of  other  professions,  raised  to 
the  dignity  of  an  office.  The  venality  of  offices  and  the 
bad  speculations  originated  by  the  Government  were 
among  the  most  objectionable  features  of  the  old  regime; 
the  legislature  endeavored  to  remedy  these  matters.0 

"Nature  makes  no  jumps,"  says  an  adage.  What  the 
naturalists  and  the  anthropologists  say  of  the  phenomena 
of  animal  and  vegetable  life,  is  equally  true  of  social 
phenomena.  The  French  Revolution  marks  by  a  violent 
furrow  the  change  in  the  political,  economic,  and  social 
regime  in  France;  but  the  work  of  the  philosophers,  the 
acts  of  the  royal  authority,  its  necessary  concessions  to  the 
new  ideas,  had  accomplished  revolutionary  phenomena 
even  before  certain  facts,  which  history  puts  to  the 
account  of  the  Revolution,  had  been  accomplished. 

Turgot,  the  Minister  of  Louis  XVI,  of  whom  his  colleague 
in  the  ministry,  Lamoignon  de  Malesherbes,  said  "  He  has 
the  head  of  Solon  and  the  heart  of  1' Hospital,"  dared  ask 
of  the  King  to  make  the  nobility  subject  to  taxes.  On 
January  5,  1776,  Turgot  presented  to  the  Council  the 
drafts  of  various  edicts  which  were  to  suppress  the  corvee 
(statute  labor)  and  the  police  regulations  of  Paris  on 
grains,  offices,  wardenships,  and  masterships. b 

All  of  these  edicts  met  with  an  active  opposition  in  the 
inner  circles  of  the  Council.  Nevertheless,  they  were 
accepted.  The  edict  involving  the  suppression  of  war- 
denships and  masterships  was  passed  March  2,  1776. 

a  Salzedo.     La  Coulisse  et  la  jurisprudence,  p.  29. 
&  Turgot,  by  L.  Robineau. 


148 


History    and   Methods    of  the    Paris    Bourse 

But  after  the  fall  of  Turgot,  in  May,  1776,  the  edicts,  which 
it  had  cost  him  so  much  trouble  to  have  passed,  were 
again  annulled. 

The  legislative  assembly,  however,  again  suppressed 
all  offices,  masterships,  and  wardenships.  "  Beginning 
with  the  coming  April  ist,"  says  article  2  of  the  law  of 
March  10,  1791,  "the  offices  of  wig  makers,  barbers,  bath 
keepers,  bagnio  keepers,  as  well  as  those  of  stock- 
brokers,— are  all  equally  abolished."  The  legislative 
assembly  placed  all  offices  on  a  basis  of  freedom. 

(33)  We  are  compelled,  although  we  have  hardly  arrived 
at  the  threshold  of  our  study  of  the  revolutionary  period, 
to  warn  the  reader  against  a  widespread  error  regarding 
the  effects  of  the  freedom  granted  to  the  profession  of 
stockbrokers. 

An  unprecedented  outburst  of  stockjobbing  took  place 
at  that  time,  and  it  is  concluded  that  the  fault  lies  in  the 
freedom  of  commerce  in  transferable  securities.0 

Stockjobbing  was  caused,  however,  by  the  troubles 
arising  from  the  foreign  political  situation,  by  the  wars, 
and  by  domestic  troubles — that  is  to  say,  riots,  insurrec- 
tions, the  cessation  of  all  production,  the  trregular  pay- 
ment of  rentes  in  assignats,  the  excessive  issue  of  assignats, 
the  law  of  the  maximum,  etc. 

(34)  Stockjobbing  is  the  result  of  political  and  financial 
disorder.     When   the  sources   of  production  have  been 
stopped,  and  when  the  necessary  commodities  for  con- 
sumption are  paid  for  with  a  depreciating  currency,  there 
must  necessarily  be  inaugurated  a  passion  for  speculation 
which  will  keep  on  increasing  so  long  as  the  originating 

a  See  Cre"pon,  counsellor  of  the  Cour  de  cassation:  De  la  Nigociation  d* 
effets  publics  et  autres,  p.  8. 

149 


National    Monetary     Commission 

evil  continues  to  grow.  It  is  somewhat  important  to 
explain  the  physiology  of  this  phenomenon. 

A  paper  currency  is  circulated  by  a  government.  It  is 
circulated  in  such  quantities  that  it  depreciates  in  the 
minds  of  those  who  receive  it.  With  this  money,  too,  it 
will  be  necessary  to  buy  the  most  essential  necessities,  and 
the  purchasers  of  these  necessities  will  find  themselves 
facing  sellers. 

If,  by  hypothesis,  the  seller  of  commodities  is  obliged 
to  specify  the  price  in  a  paper  money  whose  depreciation 
he  is  fearing,  how  will  he  protect  himself?  By  raising  his 
price  so  that  he  will  have  much  paper,  with  the  result  that 
this  paper  will  guarantee  him  by  its  quantity  against  the 
consequent  effects  of  depreciation. 

Whence  the  first  phenomenon  with  its  double  aspect: 
The  rise  in  the  price  of  commodities  along  with  the  fall  of 
paper. 

Now,  if  the  seller  whom  we  have  seen  receiving  much 
paper,  sees  that  it  depreciates  again  while  in  his  hands, 
it  will  not  be  long  before  he  will  notice  that  gold  is  the 
metal  with  which  one  pays  abroad  for  purchased  com- 
modiites,  and*  that  he  who  holds  gold,  is  safer  than  the 
holder  of  bills,  which  depreciate  while  in  his  hands.  He 
will  then  make  haste  to  change  his  paper  for  gold,  and 
through  this  operation  he  will  make  two  good  bargains; 
he  will  protect  himself  against  the  future  decline  of  his 
paper,  and  he  will  have  in  his  possession  some  gold,  which 
will  continue  to  be  in  demand  as  long  as  the  Govern- 
ment continues  to  issue  paper.  This  gold  he  will  be  able 
to  sell  again  against  paper,  or  he  will  buy  merchandise 
abroad  for  which  he  will  settle  in  gold.  As  a  holder  of 


150 


History    and   Methods   of  the   Paris    Bourse 

merchandise,  he  will  be  in  a  position  to  begin  again  the 
same  operation — to  sell  against  paper;  to  buy  gold  with 
this  paper;  to  buy  foreign  merchandise  with  this  gold. 

Whence  the  second  phenomenon:  The  emigration  of 
gold. 

Thus  there  is  manifested  the  law  known  as  Gresham's 
Law:  Bad  money  drives  out  good  money. 

Both  phenomena  took  place  during  the  Revolution. 
Assignats  depreciated  in  proportion  to  the  quantity 
issued;  the  price  of  all  things  rose.  Gold  rose.  The 
bill  of  exchange  on  the  foreign  market,  which  represented 
gold,  was  in  demand.  Speculation  was  not  the  cause  of 
these  phenomena,  but  an  inherent  condition.  It  could  not 
be  otherwise.  The  abolition  of  the  monopoly  of  stock- 
brokers was  not  the  cause,  and  monopoly,  if  it  had  ex- 
isted, would  not  have  been  able  to  prevent  it.  Besides, 
when  it  was  reestablished,  the  phenomenon  of  economic 
gravitation  could  not  be  prevented  from  asserting  itself. 

What  follows  will  prove  our  assertion  with  perfect 
clearness. 

(35)  From  the  very  first  days  of  the  Revolution  the 
financial  situation  was  a  critical  one.  On  June  17,  1787, 
the  national  assembly  declared  the  creditors  of  the  Gov- 
ernment to  be  under  the  protection  of  the  honor  and 
loyalty  of  the  French  nation.  Immediately  after,  Necker 
resorted  to  two  loans,  one  on  August  7,  and  the  other  on 
August  27 — both  of  which  were  without  success.  He  later 
resorted  to  a  patriotic  contribution  of  a  fourth  of  the 
income  of  each  citizen  exceeding  400  livres,  and  of  2^ 
per  cent  of  their  silver  plate,  jewelry,  and  coined  silver. 
It  was  not  in  this  way  that  one  could  raise  credit  and 


National    Monetary     Commission 

money.  At  this  time  the  total  debt  was  208,027,242 
francs.  Besides,  the  debt  represented  only  a  small  part 
of  the  needs  of  the  Government. 

(36)  It  was  at  this  time  that  a  decree  of  December  21, 
1789,  placed  on  sale  some  of  the  royal  domains  and  a  part 
of  the  ecclesiastical- property  in  order  to  raise  the  sum  of 
400,000,000  francs.  At  the  same  time  400,000,000  assig- 
nats  were  created,  which  were  to  be  redeemed  by  the 
proceeds  from  the  sales.  They  paid  an  interest  of  5  per 
cent. 

Four  months  after  the  creation  of  these  assignats,  by 
order  of  the  law  of  April  17,  1790,  their  interest  was 
reduced  to  3  per  cent.  According  to  the  terms  of  this 
law,  the  assignats  were  to  be  received  as  specie  in  public 
and  private  cash  offices. 

The  assignat,  which  had  depreciated  about  2  per  cent 
almost  immediately  after  its  creation,  was  quoted  in  April 
at  94.  In  other  words,  100  livres  in  paper  were  given 
for  94  livres  in  metallic  money. 

In  August,  1790,  an  issue  of  800,000,000  assignats  was 
voted  for  by  the  assembly.  These  new  assignats  which  were 
created  as  a  result  of  the  decree  of  September  29,  1790, 
bore  no  interest,  and  by  a  decree  of  October  10  the  3  per 
cent  interest  on  the  assignats  of  the  first  issue  was  cut  off. 

From  this  time  on,  it  may  be  said,  the  assignat  de- 
preciated in  the  public  estimation. 

On  October  i ,  1791,  the  quantity  of  assignats  in  circu- 
lation was  about  i, 1 5 1, 500,000 livres, and  they  lost  16  per 
cent  of  their  value.  Fourteen  months  later,  January  i , 
1793,  the  quantity  of  assignats  in  circulation  rose  to 
2,825,906,618.  They  lost  50  per  cent  of  their  value. 

152 


History   and   Methods   of  the   Paris    Bourse 

Then  came  a  series  of  decrees  all  tending  to  the  depre- 
ciation of  the  assignat.  A  decree  of  April  1 1 , 1 793,  imposed 
some  severe  penalties  on  any  person  who  should  buy  or 
sell  assignats  for  less  than  their  nominal  value  in  money, 
or  should  make  any  distinction  in  the  prices  of  his  merchan- 
dise according  to  whether  payment  would  be  made  in 
paper  or  specie. 

But  the  prices  were  to  be  stipulated  in  assignats,  so  that 
no  law  could  prevent  anyone  from  asking  for  a  higher  price 
for  his  merchandise. 

When  a  government  employs  empirical  processes  with 
a  view  to  sustain  the  public  credit,  it  produces  discredit. 

Public  trust  resides  in  the  citizen's  state  of  mind.  A 
state  of  mind  can  not  be  decreed,  especially  when  it  has 
to  exercise  itself  upon  the  valuation  of  commodities. 
But  governments,  inspired  by  a  misapprehension  of  the 
conditions  of  public  credit,  do  not  easily  yield  to  evidence. 
The  more  discredit  is  created,  the  more  do  they  entangle 
themselves  in  their  own  errors.  When  a  government 
issues  depreciating  paper  money,  if  it  investigates  the 
cause  of  the  fall,  it  is  necessary  that  it  should  without  bias 
decide  whether  it  is  the  fault  of  the  stockjobbers  or  its 
own  fault.  But  the  Government  never  hesitates.  For 
it  the  decline  is  caused  by  the  stockjobbers.  The  Bourse 
is  the  only  place  where  it  originates. 

(37)  In  the  month  of  June,  1793,  the  assignat  lost  64  per 
cent  of  its  value.  It  was  worth  36  per  cent.  A  decree 
of  June  27,  1793,  ordered  the  closing  of  the  Bourse. 

During  the  time  that  the  Bourse  was  closed,  negotia- 
tions in  coin  and  bills  of  exchange  were  transacted  in  the 
Palais  Royal,  or  as  it  was  now  called  Palais  Egalite,  in 


153 


National    Monetary     Commission 

the  place  known  as  Le  Perron.  The  stockbrokers,  removed 
in  1791,  immediately  organized  into  a  free  company,  con- 
sisting of  80  members  forming  a  syndicate,  with  the  pur- 
pose of  avoiding  all  conflict  with  the  free,  newly  come 
stockbrokers;  it  seems  that  at  that  time  there  was  not 
much  occasion  for  complaint  at  the  new  condition  of 
affairs.0 

But,  nevertheless,  the  scarcity  of  coin  and  the  decline 
of  assignats  were  attributed  to  the  Bourse.  The  stock- 
brokers were  arrested  and  their  goods  confiscated,  and  a 
decree  of  the  2ist-24th  of  August,  1793,  ordered  that 
associations  known  under  the  name  of  caisse  d'escompte 
(discount  bank),  life-insurance  companies,  and  in  general 
all  those  companies  whose  capital  is  made  up  of  shares 
"to  bearer,"  of  negotiable  bills,  or  of  book  registrations 
transferable  at  will,  were  abolished. 

(38)  These  measures  did  not  in  any  way  cause  the  assig- 
nat  to  rise  in  value.     In  July,  1793,  it  again  lost  13  per  cent 
of  the  June  price.     In  other  words,  it  was  worth  only  23 
per  cent  of  its  book  value. 

Frantic  stockjobbing  raged  at  that  time;  it  was  not 
the  free  market  which  generated  it,  but  the  causes  which 
we  have  just  examined,  and  the  very  absence  of  a  market. 
Stockjobbing  was  in  a  feverish  state  which  the  slightest 
event  could  only  increase. 

(39)  What   could  the  Convention  do?     On  August  i, 
1793,  and  on  May  10,  1794,  decrees  were  passed  imposing, 
as  the  case  might  be,  heavy  fines,  imprisonment,  or  even 
death,  on  anyone  who  should    in  any  way  discriminate 
against  the  assignat. 

0  Eugene  L£on.     £tude  sur  la  Coulisse  et  ses  operations.     Paris,  1896. 
Page  31. 

154 


History   and   Methods   of  the   Paris    Bourse 

This  measure  did  not  prevent  the  sale  of  the  most  essen- 
tial commodities  at  a  raised  price  in  assignats.  A  decree 
of  September  4,  1793,  extended  to  various  necessities  the 
decree  of  May  3,  permitting  the  directories  of  the  districts 
to  fix  a  maximum  price  for  grain  and  flour.  But,  besides 
that  it  was  practically  impossible  to  have  this  provision 
executed,  a  large  number  of  commodities  escaped  the 
category  of  those  specified. 

(40)  The  Convention,  having  observed  that  the  absence 
of  the  public  market  was  detrimental  to  public  credit, 
ordered  its  reopening  on  the  6  Floreal,  year  III,  upon  the 
request  of  Jean  Bon-Saint-Andre;  going  from  one  excess 
to  another,  the  Government  which  had  before  wished  to 
suppress  the  Bourse,  promulgated  on  August  30,  1795 
(13  Fructidor,  year  III),  a  law  making  it  an  offense  to  sell 
gold  and  silver  anywhere  else  than  on  the  Bourse.  It 
was  declared  an  offense,  also,  by  this  same  law,  to  sell, 
in  any  public  place  other  than  the  Bourse,  any  kind  of 
merchandise  not  shown  at  the  place  of  the  sale,  and 
to  sell  goods  and  securities  which  one  does  not  actually 
own  when  making  the  sale.  The  penalties  for  either  of 
these  offenses  were  imprisonment  for  two  years,  public 
exposure  of  the  offender  with  an  inscription  on  his  breast 
of  the  word  "  agioteur"  (stockjobber),  and  confiscation  of 
his  property  for  the  benefit  of  the  Republic. 

It  was  at  this  time  that  the  assignat  lost  97.25  per  cent 
of  its  value.  It  continued  to  decline  and  was  worth  no 
more  than  2  per  cent,  having  lost  98  per  cent. 

The  convention  closed  the  Bourse  again,  September  i, 
I795  (25  Fructidor,  year  III),  eight  days  after  having 
reopened  it;  and  the  assignat  still  kept  on  declining. 
October,  1795,  it  was  worth  1.36. 

155 


National    Monetary     Commission 

(41)  A  new  law  on  the  Bourse  was  promulgated  October 
20,  1795.  It  is  the  law  of  28  Vendemiaire,  year  IV. 

Since  the  time  of  the  Legislative  Assembly,  the  assignat 
had  become  the  only  credit  and  loan  instrument  of  the 
Revolution. a 

In  1792,  the  maker  of  a  bill  to  bearer  was  made  liable 
to  the  death  penalty.6 

In  the  year  IV  (October,  1 795)  the  number  of  assignats 
in  circulation  represented  17,879,337,898  livres,  and  during 
the  last  three  months  of  that  period  5,541,194,037  livres 
had  been  issued. 

During  the  year  IV  the  manufacture  of  assignats  rose 
to  70,000,000  daily.  The  less  they  were  worth,  the  more 
of  them  was  required ;  or,  rather,  the  more  of  them  that 
were  made,  the  less  they  were  worth. 

Terrible  famines  afflicted  the  country  and  provoked 
bloody  insurrections.  England  undertook  to  fight  France 
by  every  way  possible.  She  did  not  limit  her  hostilities 
to  the  expedition  of  Quiberon.  Marquis  de  Puissage  per- 
suaded Pitt  of  the  advantage  of  inundating  the  enemy's 
country  with  counterfeit  assignats,  to  be  fabricated  by 
the  best  engravers  of  Holland  "with  such  skill  that 
Cambon  himself  would  accept  them."c 

It  is  under  these  circumstances  that  the  law  on  the 
police  regulations  of  the  Bourse,  28  Vendemiaire,  year  IV, 
was  passed. 

<*  L£on  Say  (Dictionnaire  des  Finances,  under  the  words  Public  Debt, 
p.  i,  425.  Charles  Gomel,  Histoire  financiere  de  la  Legislation  et  de,  la  Con- 
vention. Paris,  1905,  Guillaumin,  editor.  2  vol.  Passim). 

&  Albert  Wahl  (Traite  theorique  et  pratique  des  litres  au  porteur,  Paris, 
1891;  Rousseau,  edit.,  t.  i,  No.  145). 

c  Michelet,  Histoire  du  XIX  siecle.     Directoire.     Chapter  Quiberon. 


156 


History   and   Methods   of  the   Paris   Bourse 

Twenty-five  stockbrokers  were  to  be  appointed,  twenty 
of  whom  were  to  carry  on  banking  and  negotiate  paper 
on  the  foreign  market,  and  the  remaining  five  were  to 
deal  in  coin  and  bullion.  No  transaction  was  legally 
recognized  or  valid  which  had  not  been  made  through 
the  agency  of  these  twenty  or  of  these  five  stockbrokers, 
wherever  their  respective  agency  was  required. 

Further,  the  law  prohibits  the  stockbrokers  from 
negotiating  exchange  bills  on  the  foreign  market  for  their 
own  account,  and  from  any  trading  whatsoever  in  exchange 
upon  the  foreign  market  for  future  delivery  or  on  option, 
under  penalty  of  being  reputed  stockjobbers  and  being 
punished  as  such,  according  to  the  law  of  13  Fructidor, 
year  III.  (See  No.  40.) 

(42)  These  laws  of  year  III  and  year  IV  show  us  ten- 
dencies opposite  to  those  of  1791.  After  a  period  of 
absolute  liberty,  there  followed  a  period  of  regulation, 
strict,  rigid,  and  extremely  menacing.  The  Bourse  was 
made  responsible  for  disturbances  in  the  prices  which 
were  caused  by  the  political  and  economic  troubles  of  the 
period. 

In  the  years  III  and  IV  the  fundamental  principles  of 
public  right  counted  for  nothing.  If  the  life  and  liberty 
of  the  citizens  were  not  respected,  would  the  principle 
of  liberty  in  commerce  be  respected? 

In  this  way  are  explained  the  Draconian  measures  of 
years  III  and  IV.  These  laws  were  enforced  with  diffi- 
culty, and  when  circumstances  permitted  it,  and  peace 
was  restored,  a  new  legislation  was  ushered  in  more  hu- 
mane and  more  moderate. 


157 


National     Monetary     Commission 

(43)  In  August,  1 796  (Thermidor,  year  IV) ,  the  quantity 
of  assignats  in  circulation  represented  45,578,810,040 
livres.  They  fell  to  0.36  per  cent  and  even  to  nothing  at 
all.  A  law  of  28  Ventose,  year  IV  (March  18,  1796), 
ordered  their  exchange  for  territorial  drafts  in  the  pro- 
portion of  30  for  i.  Twenty-four  billion  assignats  were 
exchanged  for  800,000,000  drafts  (or  to  be  more  exact, 
promises  for  drafts),  to  the  payment  of  which  were  as- 
signed the  proceeds  from  the  sale  of  3,785,000,000  livres 
in  territorial  property.  In  spite  of  this  change,  the 
assignats  continued  to  remain  in  circulation  up  to  the 
time  when  the  law  of  22  Pluviose,  year  IV  (February  10, 
1797),  ordered  the  complete  canceling  of  those  which 
should  not  be  presented  for  exchange  on  the  following  first 
Germinal. 

The  territorial  drafts  also  were  paper  money  and  had  a 
forced  price  from  the  day  of  their  creation.  On  the  very 
day  of  the  issue,  in  spite  of  penal  prescriptions  which  were 
intended  to  keep  the  price  at  par,  the  promises  for  drafts 
fell  from  100  livres  to  18  livres.  The  law  of  29  Messidor 
(July  17,  1796)  granted  freedom  to  transactions  and  sup- 
pressed the  forced  price  of  the  drafts  which  anyhow  was 
of  little  account,  as  even  the  Government  accepted  their 
value  only  according  to  the  current  market  prices.  The 
surrender  of  the  national  property  into  the  hands  of  the 
bearers  raised  the  prices  for  awhile;  but  in  the  following 
December  they  again  suffered  a  decisive  relapse,  before 
there  had  even  been  a  chance  to  change  the  promises  of 
drafts  for  real  certificates.  The  law  of  16  Pluviose,  year 
V  (February  4,  1797).  withdrew  them  from  circulation. a 

°  J.  M.  Fachan.     Hislorique  de  la  Rente  franqaise. 
158 


History   and   Methods   of  the   Paris    Bourse 

In  order  to  get  an  idea  of  the  rise  of  gold  in  compari- 
son to  assignats,  let  us  give  the  following  examples.  In 
August,  1795,  the  gold  louis  was  worth  i  ,020  livres  in 
paper;  in  September,  1,200;  in  October,  3,000;  in  Decem- 
ber, 5,100;  in  January  and  February,  1796,  8,600  livres. 

The  accompanying  illustrations  show  the  forms  of 
assignats  of  different  denominations. 

(44)  While  the  convention  was  proceeding  with  meas- 
ures which  belong  to  the  field  of  political  history  and  also 
with  financial  measures  which   we   have  just  examined, 
the  Grand  Livre  de  la  Dette  Publique  (Great  Book  of  the 
public  debt)    was  established.     This  document  contains 
the  totality  of  the  government  liabilities  constituting  the 
registered  debt.     The  desire  of  Cambon  was  that  all  the 
government  debts  should  be  capable  of  being  placed  on 
the  Grand  Livre.     This  plan  was  incompatible  with  the 
wide  range  of  liabilities  which  the  State  was  led  to  con- 
tract.    Therefore  when  one  speaks  to-day  of  the  Grand 
Lime  one  merely  means  the  book  open  to  the  registration 
of  rentes. 

Up  to  28  Pluviose,  year  IV  (February  17,  1796),  rentes 
were  paid  for  in  assignats  at  their  nominal  value.  The 
holders  of  government  rentes  were  reduced  to  beggary. 
In  the  year  IV,  like  government  employees,  they  received 
for  a  certain  time  a  daily  ration  of  bread  and  meat. 

(45)  The  more  the  assignat  depreciated,  the  heavier  the 
debt  became,  since  the  Government  received  assignats  at 
their  nominal  value  and  delivered  them  at  their  real  value. 
The  Treasury  was  placed  in  an  impossible  position,  the 
only  means  of  escape  being  nothing  less  than  bankruptcy. 

(46)  The  distress  of  the  Treasury  was  such  that  the 


159 


National    Monetary     Commission 

government  of  the  Directory  went  into  bankruptcy,  9 
Vendemiaire,  year  VI  (September  30,  1797). 

The  law  passed  on  that  day  ordered  the  inscription  of 
rentes  in  the  Grand  Livre  reduced  by  two-thirds.  The 
third  inscribed  took  the  name  of  the  "funded  third" 
(tiers  consolide).  The  interest  was  fixed  at  "  denier  vingt" 
(the  twentieth  denier),  that  is  to  say,  at  5  per  cent.  The 
other  two-thirds  were  reimbursed  in  bonds  "to  bearer" 
(bonsau  porteur)  called  "Dette  publique  mobiliere"  (Floated 
public  debt) .  These  securities  had  no  value,  and  tumbled 
almost  immediately  to  zero. 

Subsequently,  on  Ventose  30,  year  IX  (March  21,  1801), 
the  Consular  government  passed  a  law  entitling  the  bonds 
"  to  bearer  "  of  the  two-thirds  to  be  converted  into  perpet- 
ual rentes,  in  the  proportion  of  one-quarter  per  cent  of 
the  quantity  brought  for  exchange.  In  this  way  a  mil- 
lion of  5  per  cent  perpetual  rentes  were  created.  On  the 
22d  of  February,  1806,  the  collection  and  burning  of  the 
bonds  of  the  two-thirds  were  ordered.  Their  liquidation 
was  achieved  by  means  of  their  being  funded  at  5  per  cent 
(Loan  of  September  15,  1807).° 

The  financial  operations  of  the  year  VI  consisted  of  an 
issue  of  40,2 16,000  francs  of  5  per  cent  rentes.  At  the  end 
of  the  eighteenth  century  the  total  of  the  French  funded 
debt  amounted,  in  round  numbers,  to  46,000,000  of  rentes, 
representing  a  capital  of  920,000,000  francs. & 

Let  us  recall  that  these  issues  were  registered.  Rente 
securities  "to  bearer"  exist  only  since  the  ordinance  of 
April  29,  1831.  France  reestablished  her  credit  when  she 

a  Vide  Fachan :  Historique  de  la  Rente  jranqaise  et  des  Valeurs  du  Tresor, 
p.  132. 

&  Leon  Say.     Dictionnaire  des  Finances.     Under  "  Dette  Publique." 

1 60 


History   and   Methods   of  the   Paris    Bourse 

went  into  bankruptcy.     This  statement  seems  paradoxical, 
but,  nevertheless,  nothing  can  be  more  true. 

(47)  The  great  legislative  work  of  the  Consulate  affected 
the  Bourse  as  well  as  a  number  of  other  institutions,  and  we 
owe  to  the  legislation  of  this  period  the  fundamental  law 
of  28  Ventose,  year  IX,  in  regard  to  commercial  bourses. 
Three  principal  considerations  seem  to  have  actuated  the 
legislator  of  the  year  IX:  (i)  To  establish  order  on  the 
bourses;  (2)  to  reconcile  the  provisions  necessary  to  as- 
sure public  order,  with  a  proper  regard  for  the  principle  of 
freedom  of  trade ;  (3)  to  preserve  the  institution  of  stock- 
brokers from  the  risks  of  speculation  and  stockjobbing. 

In  order  to  insure  the  attainment  of  these  ends  the  law 
requires  that  the  stockbrokers  be  appointed  for  their 
public  trust  by  the  Government,  which  shall  be  guided  in 
their  choice  by  their  moral  character  and  their  professional 
knowledge,  and  shall,  besides,  demand  the  pledging  of  a 
part*  of  their  fortune  with  the  State  as  a  guarantee  of 
their  good  conduct  and  of  proper  expiation  for  their  errors 
or  failures.  The  law  also  emphasizes  the  principle  of  the 
freedom  of  commerce,  expressly  stating  that  nobody  is 
obliged  to  have  recourse  to  an  intermediary,  if  he  does 
not  desire  it. 

(48)  Further,  the  stockbrokers  were  subjected  to  several 
regulations  with  a  view  to  prevent  speculation  and  stock- 
jobbing.    Thus,   they  were  obliged    to  keep  a  journal; 
their  books  were  to  be  marked  and  signed  by  the  President 
of  the  Tribunal  de  commerce;  they  could  not  trade  nor 
carry  on  banking  for  their  own  account;  no  one  who  had 
been  in  bankruptcy   was   allowed  to  assume  the  duties 
of  a  stockbroker.     The  law  also  makes  the  stockbroker 


161 


National     Monetary     Commission 

responsible  for  the  delivery  of  the  securities  sold  and  for 
the  payment  of  the  sums  stipulated,  even  before  either 
have  been  received  by  him  from  his  clients — his  security 
being  appropriated  for  this  pledge  if  need  be .  This  respon- 
sibility was  intended  as  a  check  upon  transactions  for 
future  delivery.  All  these  regulations  were  embodied  in 
the  decree  of  the  27  Prairial,  year  X. 

(49)  Transactions  for  future  delivery,  however,  were  not 
prohibited  to  private  individuals.     But  still  this  kind  of 
operations  could  not  benefit  from  the  security  guaranteed 
by  the  law  for  transactions  through  an  intermediary. 

(50)  At  this  time  the  scope  of  action  for  stockbrokers 
was  very  narrow.     The  official  quotation  list  was  wholly 
contained  upon  the  recto  of  an  octavo  leaf,  the  largest 
part  of  which  was  given  to  gold  and  silver.     It  contained 
only  ten  kinds  of  securities,  and  no  quotations  for  the 
account.     It  is  only  in  1844  that  the  official  quotation  list 
assumes   its   present   form,   with   columns   for   cash    (du 
comptant),   for  future   delivery    (du  terme),   for  continu- 
ations (reports),  and  for  options  (des  prime). 

FIFTH  DIVISION. — The  Nineteenth  century. 

(51)  The  history  of  the  French  financial  market  during 
the  whole  of  the  nineteenth  century,  is  filled  with  three 
groups  of  events  of  unequal  importance. 

1.  The   operating  of   the   Bourse   itself.     The    financial 
market  has  benefited  by  the  progress  of  public  credit,  and, 
in  its  turn,  has  given  further  impulse  to  that  progress. 

2.  A  special  event.     The  acknowledgment,  in  1885,  of  the 
legality  of  "  marches  a  terme  "  (dealings  for  future  delivery) 
displayed  a  tendency  on  the  part  of  the  French  lawmaker 


162 


y^-o*-  ""*  JP^V 

OF   THE  \ 

UNIVERSITY    I 

V  OF  1 

X^^UFORH^^ 

History    and    Methods   of  the   Paris    Bourse 

to  include  transactions  in  securities  within  the  scope  of 
commercial  transactions  under  common  law. 

3.  Another  special  event.  The  struggle  of  the  "agents 
de  change"  (stockbrokers)  against  the  "  coulissiers  "  (curb 
brokers) — that  is  to  say,  privilege  against  freedom, 
monopoly  against  competition — ended,  after  sundry  vicis- 
situdes, in  the  course  of  which  the  principle  of  uphold- 
ing the  curb  (Coulisse)  had  prevailed,  in  a  retrogressive 
movement  in  1898 — that  is  to  say,  in  the  strengthening 
of  the  stockbrokers'  monopoly. 

(52)  The  needs  of  the  States  impelled  their  governments 
to  resort  to  credit.  In  order  to  do  so,  they  had  recourse 
to  issues  of  securities — certificates  of  rentes  or  loans  in 
sundry  forms.  To  insure  success  for  their  operations, 
a  wide  market  was  required.  And  the  market  gave 
them  the  benefit  which  results  from  the  existence  of  some 
sort  of  constant  source  of  credit. 

Any  progress  in  the  industrial  line  must  necessarily 
have  its  origin  either  in  an  invention,  in  a  mere  improve- 
ment, or  in  a  stroke  of  genius.  But  the  inventor's 
genius  itself  is  not  sufficient.  That  social  power  "inven- 
tion" needs  another  power  which  should,  in  some  way, 
give  it  the  necessary  impulse  to  cause  it  to  leave  the 
purely  scientific  realm.  That  other  power  is  organiza- 
tion. It  includes  the  consolidating  of  capital,  the  deter- 
mining of  the  rights  of  the  owners,  the  directing,  the 
financing,  and  the  installing  of  machinery.  It  is  easily 
understood,  however,  that  organization,  so  far  as  it 
concerns  an  appeal  to  the  forces  of  capital,  requires 
liberal  corporation  laws  and  well  equipped  financial 


163 


National    Monetary     Commission 

markets,  where  transactions  in  securities  are  easy,  quick, 
and  safe. 

When  a  country  is  conscious  of  the  existence  of  such  a 
market,  the  budding  out  of  an  enterprise,  the  shares  of 
which  have  circulated  on  the  Bourse,  is  apt  to  give  rise 
to  another  enterprise,  and  thus  is  proven  the  law  found 
in  the  natural  order  of  things  as  well  as  in  the  sociological 
order,  that  the  function  creates  the  organ  and  the 
organ  hastens  the  function. 

Thus,  the  development  of  securities  in  France  has 
been  the  expression  of  the  development  of  public  credit, 
especially  of  the  credit  of  the  French  State,  of  the 
Departments,  and  of  commerce;  the  expression  of  the 
parallel  movement  above  referred  to,  which  took  place 
abroad  and  which  manifested  itself — especially  during  the 
second  half  of  the  nineteenth  century — in  a  considerable 
influx  of  foreign  securities  into  France;  and,  finally,  the  ex- 
pression of  the  incorporation  of  numerous  limited-liability 
companies  in  shares  (societes  anonymes)  in  important 
industries  and  in  powerful  commercial  enterprises,  ren- 
dered easier  and  easier  by  the  more  and  more  liberal 
corporation  laws,  the  establishment  of  large  credit  institu- 
tions, and  the  development  of  dealings  for  future  delivery. 

(53)  In  1900,  during  the  World's  Fair,  an  "Interna- 
tional Congress  of  Securities  "  was  held.  We  take  pleasure 
in  selecting  the  following  remarks  from  the  report  on  the 
organization  of  the  Congress,  presented  by  M.  Alfred 
Neymarck : 

"Since  the  beginning  of  the  nineteenth  century,  and 
more  particularly  in  the  second  half,  there  have  been  cre- 
ated and  issued  in  Europe  alone  more  than  400,000,000,000 


164 


History    and   Methods   of  the   Paris    Bourse 

of  pieces  of  paper  called  certificates  of  rentes,  shares  and 
bonds,  dividend  shares,  lottery  bonds,  etc.,  designated 
under  the  generic  name  of  "valeurs  mobilieres"  (trans- 
ferable securities) . 

"These  securities  yield  yearly  15,000,000,000  to 
20,000,000,000  francs  and  are  distributed  among  1 5,000,000 
to  20,000,000  holders  of  certificates,  capitalists,  and 
'rentiers'  (private  holders  of  government  bonds).  Now, 
the  aggregate  circulation  of  metallic  currency  and  bank 
notes,  all  over  the  world,  hardly  reaches  5  per  cent  of  the 
amount  of  400,000,000,000 — that  is,  20,000,000,000.  On 
December  31,  1899,  the  total  amount  of  paper  money, 
in  all  the  European  banks  of  issue,  amounted  in  round 
numbers  to  15,000,000,000  francs  (to  be  exact, 
14,992,000,000);  the  gold  reserve  kept  on  hand  by  these 
banks,  amounted  to  7,859,000,000,  while  the  holdings  of 
silver  were  2,585,000,000 — making  a  total  of  10,444,000,000 
francs.  The  aggregate  of  paper  money  and  cash  on  hand 
amounted  to  25,000,000,000  francs. 

"  From  the  discovery  of  America  up  to  the  present  time, 
the  total  value  at  par  of  all  the  silver  and  gold  which, 
during  four  hundred  years,  has  been  extracted  from 
the  bowels  of  the  earth,  may  be  estimated  to  be 
between  100,000,000,000  and  110,000,000,000 — nearly 
50,000,000,000  gold  and  almost  60,000,000,000  silver; 
while  the  aggregate  of  transferable  securities  created  and 
circulated  in  Europe  exceeds  400,000,000,000. 

"This  creating  of  negotiable  instruments,  and  their 
distribution  throughout  all  countries  of  the  world,  is  surely 
one  of  the  characteristics  of  modern  times.  *  *  * 


165 


National     Monetary     Commission 

"The  creating  and  successive  issuing  of  this  mass  of  se- 
curities, always  easy  to  purchase  and  to  sell  on  the  Bourse, 
have  been  the  real  cause  of  credit  expansion.  They  were 
instrumental  in  accomplishing  real  marvels  in  France  and 
abroad.  As  personal  property  increased,  endeavors  have 
been  made  to  render  exchanges  easy,  and  to  make  trans- 
fers as  little  expensive  as  possible;  transferable  securities, 
owing  to  their  denomination,  their  form,  their  mode  of 
maturity  for  the  payment  of  interest,  their  conditions  for 
redemption,  and  the  ease  with  which  they  are  negotiated, 
have  been  brought  within  the  reach  of  all  purses,  and 
have  thus  developed  the  spirit  of  saving. 

"  The  consolidation  of  capital,  under  the  form  of  stock 
companies,  issuing  shares  and  bonds  that  everybody  can 
obtain,  encompasses  on  all  sides  the  civilized  nations  of 
the  world. 

"We  may  say,  with  Paul  Leroy-Beaulieu,  that  now, 
owing  to  capital  being  accumulated  in  the  shape  of 
negotiable  instruments,  it  is  the  stock  company  which 
takes  us  on  a  journey;  often  it  provides  us  with  food 
and  lodging,  sells  us  coal  and  light,  makes  up  our  cloth- 
ing and  even  sells  it  to  us;  it  procures  news  for  us  and 
inspires  our  newspapers.  Further,  it  insures  our  lives 
and  our  dwellings;  it  feeds  the  unassuming  Parisian  in 
the  'Bouillons '  (cheap  cook-shops)  and  feasts  the  stylish 
Parisian  in  the  fashionable  wine  taverns. 

"The  distribution  of  all  these  securities  has  materially 
contributed  to  the  formation  of  small  inheritances.  It 
has  influenced  the  development  of  savings  institutions, 
mutual  benefit  societies,  pension  funds,  and  insurance; 
it  has  thus  rendered  invaluable  service  in  the  public  role 


1 66 


History   and   Methods    of  the   Paris    Bourse 

it  has  fulfilled.  Thanks  to  it,  these  companies  multiply 
and  increase  as  the  capitalization  of  their  funds  is  made 
easier. 

' '  It  has  also  had  another  result.  It  has  shown  that  there 
is  no  longer  a  plutocracy,  but  a  veritable  financial  democ- 
racy; when  these  thousands  of  millions  of  certificates  are 
minutely  segregated,  there  are  only  found  atoms  of  cer- 
tificates of  stocks  and  bonds,  and  atoms  of  income — so 
great  is  the  number  of  capitalists  and  independent  indi- 
viduals who  divide  these  securities  and  these  incomes 
among  themselves. 

"At  the  beginning  of  the  year  1800,  the  securities  negoti- 
able on  the  Paris  Bourse  included  certificates  of  'Rentes 
des  tiers  consolides'  (French  government  stock  reduced  to 
one-third,  September  30,  1797,  see  No.  46),  certificates  of 
the  '  caisse  des  rentiers '  (office  for  the  paying  of  rentes  to 
independent  individuals) ,  shares  of  the  Banque  de  France, 
and  3  per  cent  English  consols — in  all,  about  seven  or 
eight  kinds  of  securities,  representing  about  40,000,000 
francs  in  rentes,  and  less  than  200,000,000  francs  in  capital 
or  other  property.  The  first  bourse  quotation  list  dates 
from  the  second  Vendemiaire,  year  IV  (September,  1795). 
It  gave  the  foreign  exchange  quotations:  Amsterdam, 
Hamburg,  Madrid,  Cadiz,  Genoa,  Leghorn,  Basle;  then, 
under  the  pompous  headings  of  '  Public  Securities  and 
Gold  and  Silver  Bullion  and  Coins,'  it  gave  the  prices  of 
Louis,  Ecus,  fine  gold,  silver  bars,  registered  rentes,  and 
bonds  to  bearer. 

"  Louis  were  quoted  1,165  livres;  other  coins,  registered 
rentes,  and  bonds  to  bearer,  were  entered  '  No  quotation.' 

"  Now,  on  February  28,  1900,  the  official  quotation  list 

167 


National     Monetary     Commission 

contained:  (i)  not  less  than  442  stock  companies,  the 
shares  and  bonds  of  which,  numbering  90,909,250, 
represented,  at  the  market  prices  of  that  day,  a  capital  of 
42,000,000,000  francs;  and  (2)  203  loans  of  governments, 
departments,  and  cities,  amounting  to  56,000,000,000 
francs. 

"Adding  26,000,000,000  francs  in  French  rentes  to  that 
amount,  we  find  the  capital  of  securities  entered  on  the 
official  quotation  list  on  February  25,  1900,  reaches 
almost  125,000,000,000  francs. 

"  On  a  corresponding  date,  viz,  March  15, 1900,  the  quo- 
tations on  the  coulisse  (marche  en  banque)  were  as  follows 
according  to  the  official  bulletins  of  the  Syndicat  des 
banquiers  en  valeurs  a  terme  (Syndicate  of  Bankers  in 
Securities  for  the  Account)  and  the  Syndicat  des  banquiers 
en  valeurs  au  comptant  (Syndicate  of  Bankers  in  Securi- 
ties for  Cash),  acting  near  the  Paris  Bourse:  For  future 
delivery,  4  kinds  of  government  issues,  3  kinds  of  rail- 
road securities,  and  47  mining  and  sundry  securities; 
for  cash,  386  different  kinds  of  securities,  of  which  38  were 
issues  of  different  States,  57,  of  gold  mines,  38,  of  other 
mines,  26,  of  railroad  and  transportation  lines,  and  35,  of 
metal  industries;  the  balance  was  in  sundry  securities, 
including  77  kinds  of  bonds,  of  which  22  were  railroad 
bonds,  and  22,  gas  and  electricity  bonds. 

"  It  may  be  said  that  the  total  number  of  transferable 
securities  quoted  on  the  Paris  Bourse  and  the  sundry 
French  markets,  comes  up  to  about  2,000  denominations, 
representing  a  capital  not  far  from  135,000,000,000  francs. 
Of  these  135,000,000,000,  80,000,000,000  to  85,000,000,000 
francs  belong  to  our  French  capitalists  and  'rentiers,' 

168 


History   and   Methods   of  the   Paris    Bourse 

and  to  insurance  and  sundry  companies,  yielding,  on  an 
average,  an  income  of  4,000,000,000  to  5,000,000,000 
francs. 

"Such  is,  in  a  general  way,  the  situation  of  trans- 
ferable securities  during  the  nineteenth  century." 

(54)  We  shall  trace  the  history  of  the  development  of 
public  credit,  following  the  genesis  of  each  important 
phenomenon,  its  growth  and  development,  up  to  its  attain- 
ment of  its  present  state.  This  will  in  some  way  reflect 
also  the  plan  of  a  history  of  the  Bourse,  of  the  transferable 
securities,  and  of  the  financial  institutions  of  the  nineteenth 
century.  For  this  purpose  we  shall  start  with  the  public 
credit,  properly  so  called — the  public  loans. 

Public  debts  are  ordinarily  divided  into  four  important 
categories : 

1.  The  perpetual  debt. — The  borrower  is  not  compelled 
to   pay   back   the   principal.     He   is   liable  only   for  the 
interest.     But  he  has  the  privilege  to  pay  the  principal  if 
he  wishes  to,  although  this  is  not  required. 

2.  The  amortisable  debt. — The  borrower  agrees  to  pay, 
besides  the  interest,  a  part  of  the  capital,  until  the  entire 
principal  is  paid. 

3.  The  floating  debt,  comprising  time  loans  of  relatively 
short  duration  necessitated  by  needs  of   the  exchequer. 

4.  The  life  debt,  consisting  of  rentes  which  expire  on  the 
death  of  the  beneficiary,  and  originating  in  the  majority 
of  cases  in  pensions  of  retired  veteran  soldiers  and  servants 
in  the  civil  service.     These  last  two  categories  in  the 
French  public  debt  do  not  concern  us,  for  we  are  investi- 
gating only  that  part  of  the  debt  which  is  represented  by 
securities  circulating  on  the  Bourse.     In  this  respect,  the 

169 


National     Monetary     Commission 

last  two  categories  play  only  a  nominal  part  on  the  Bourse. 
It  is  different,  however,  in  the  case  of  the  perpetual  debt  and 
the  amortisable  rente.  These  are  the  life  substance  of  the 
market  for  French  rentes.  We  shall  scan  their  history  briefly. 

(55)  The  bankruptcy  of  two-thirds  of  the  debt  in  the 
year  VI  of  the  Republic  did  not  entirely  solve  the  financial 
problem. 

From  the  time  of  the  creation  of  assignats,  budgets 
ceased  to  be  made.  Every  month  the  balance  between 
the  receipts  and  the  expenses  was  filled  by  a  previous 
deduction  from  the  reserve  of  assignats.  No  bookkeep- 
ing records  were  kept  since  the  convention.  The  dis- 
order which  needed  to  be  straightened  out  was  so  great 
that  not  until  1801  was  it  found  possible  to  make  a  budget. 
The  Cour  des  Comptes  (audit  office)  was  instituted  Sep- 
tember 1 6,  1807.  The  Bank  of  France  was  reorganized 
in  1806;  it  was  founded  in  i8oo.a  There  was  no  public 
credit  worth  speaking  of. 

aThe  Banque  de  France  was  founded  on  the  24th  Pluviose,  year  VIII 
(February  13,  1800).  At  the  beginning  it  was  a  free  credit  company  with 
the  right  of  issuing  notes,  formed  by  an  association  of  persons  high  in  the 
political  and  financial  world  of  Paris.  The  capital  consisted  of  30,000,000 
francs,  divided  into  30,000  shares  of  i  ,000  francs  each.  The  Amortization 
Office  was  authorized  by  a  decree  of  the  28th  Nivose,  year  VIII,  to  sub- 
scribe for  5,000  shares.  The  total  placing  was  slow,  and  ended  in  1802 
According  to  the  terms  of  its  original  statutes,  the  bank  had  for  its  object: 
i°,  bank  operations,  such  as  discount,  collections,  advances,  and  deposits; 
2°,  the  emission  of  "bearer"  and  "sight"  notes.  The  issues  were  to  be 
made  in  such  a  proportion  that,  with  the  cash  reserve  in  its  vaults  and  the 
maturity  of  the  paper  in  its  portfolios,  the  bank  could  in  no  case  be 
exposed  to  the  necessity  of  deferring  the  payment  of  its  engagements. 
The  law  of  the  24th  Germinal,  year  XI  (April  14,  1803),  conferred  upon 
its  statutes  a  legal  character,  and  made  the  bank  the  only  association  hav- 
ing the  right  of  issuing  notes.  Its  organization,  functions,  and  powers 
were  modified  and  completed  several  times  by  special  laws.  The  capital 
of  the  Banque  de  France  at  present  amounts  to  182,000,000  francs.  The 
number  of  its  shareholders  is  31,249. 

170 


History   and   Methods   of  the   Paris    Bourse 

(56)  At   the  beginning  of  the  nineteenth  century  the 
funded    debt   amounted   to   50,000,000  francs  of  5   per 
cent  rentes,  representing  a  nominal  capital  of  a  billion 
francs. 

On  April  i,  1814,  the  perpetual  debt  was  63,307,637 
francs  of  rentes. 

On  July  31,  1830,  the  amount  of  the  perpetual  debt 
was  about  202,381,180  francs  of  rentes. 

At  the  time  of  the  revolution  of  1848,  the  perpetual  debt 
was  about  244,287,266  francs  of  rentes. 

On  December  31,  1851,  the  perpetual  debt  amounted 
to  242,774,478  francs  of  rentes;  this  means  that  during  the 
second  Republic  there  was  a  decrease  of  2,000,000  francs 
of  rentes,  due  to  an  excess  of  abrogations  over  issues. 

During  the  second  Empire,  the  sum  total  of  the  per- 
petual debt  rose  to  402,977,516  francs  (December  31, 
1870). 

Although  the  financial  operations  of  the  Third  Republic 
have  been  enormous — having  had  to  liquidate  the  debts 
of  the  Second  Empire  and  the  charges  of  the  war  of  1871, 
amounting  to  9,000,000,000  francs — yet  the  total  increase 
of  the  funded  debt  up  to  the  present,  owing  to  success- 
fully conducted  extinctions,  amounts  only  to  254,695,999 
francs. 

On  January  i,  1909,  the  amount  of  the  perpetual  debt 
was  657,673,515  francs  of  rentes,  represented  uniquely  by 
3  per  cent  perpetual  rente  securities.  The  amortisable 
debt  amounted  to  107,629,800  francs. 

(57)  One  of  the  phenomena  which  are  conducive  to  the 
establishment  of  public  credit  is  the  democratization  of 
the  transferable  security.     The  more  easily  accessible  the 


171 


National    Monetary     Commission 

transferable  security  is  to  all,  the  more  extensive  will  pub- 
lic credit  be,  and  the  larger  the  clientage  of  the  Bourse. 

The  Restoration — by  establishing  in  the  treasuries  a 
supplementary  Grand  Livre  (great  book  for  the  inscription 
of  rentes,  see  No.  44) ;  the  Government  of  I,ouis  Philippe — 
by  authorizing  the  creation  of  securities  "to  bearer" 
through  an  ordinance  of  April  29,  1831;  and  the  Second 
Empire  and  the  Third  Republic — by  reducing  the  figures  of 
the  minimum  amount  of  coupons  (there  exist  coupons  for  3 
francs  rente)  and,  especially,  by  having  resorted  to  issues 
by  public  subscription — have  to  a  marked  degree  extended 
the  clientage  of  the  French  rente. 

In  1848  there  were  291,808  entries  of  rentes;  in  1860, 
1,073,801;  in  1870,  3,580,805;  in  1903,  4,631,857.  In 
1900  the  number  of  rentiers  was  about  1,500,000. 

(58)  The  question  of  the  methods  of  the  emission  of 
rentes  is  intimately  connected  with  the  study  of  the  con- 
ditions of  the  working  of  a  financial  market.  Aside  from 
the  fact  that  a  direct  appeal  is  sometimes  made  to  the 
Bourse,  by  immediately  offering  the  created  rentes  for  sale 
on  its  market,  it  is  often  also  the  place  where  special  ne- 
gotiations are  created  before  the  issue,  properly  speaking, 
takes  place — negotiations  "for  the  issue"  (a  I' emission) , 
or  negotiations  for  the  results.  Once  the  emission  has 
been  realized,  wholesale  subscribers  and  even  guarantee 
syndicates  undertake  diverse  operations  on  the  market. 
Finally,  the  securities  having  more  or  less  taken  rank,  they 
become  the  regular  merchandise  of  the  market  in  trans- 
ferable securities. 

The  Revolution  did  not  have  recourse  to  public  loans 
in  the  modern  sense  of  the  term.  Its  attempts  to  make 


172 


History    and   Methods   of  the   Paris   Bourse 

patriotic  and  forced  loans  completely  failed.  It  ob- 
tained extraordinary  resources  through  paper  money 
guaranteed  by  national  property,  assignats,  territorial 
drafts,  etc.  The  First  Empire  could  make  no  use  of 
the  financial  market  for  its  needs,  both  on  account 
of  the  insecurity  of  the  resources  of  the  State,  and  on 
account  of  the  dwarfed  condition  of  the  banking  busi- 
ness and  the  impoverishment  of  France  in  general,  owing 
to  the  constant  state  of  war  and  revolutions  lasting 
for  twenty-five  years.  And  although  the  Restoration 
did  raise  loans  by  public  subscription,  yet  even  these 
were  not  loans  in  the  real  sense  of  the  word,  owing  to 
the  undemocratic  conditions  requiring  only  wholesale 
subscriptions  with  a  minimum  of  5,000  francs  and  the 
presentation  of  guarantees.  A  loan  of  9,585,220  francs 
of  5  per  cent  rentes  was  placed  in  1821,  by  contract,  in 
the  hands  of  a  consortium,  in  which  the  firms  of  Hope,  Hot- 
tinger  &  Co.  and  Baguenault,  Delessert  &  Co.  took  part. 
On  July  10,  1823,  a  loan  of  23,114,516  francs  of  5  per  cent 
rentes  was  contracted  with  the  Rothschild  Brothers  for 
89.55.  From  that  time  on  until  the  Second  Empire  the 
Rothschilds  had  the  monopoly  of  these  issues  of  rentes. 

The  process  of  public  subscription  began  really  to 
be  used  in  France  only  since  1854.  Napoleon  III,  obey- 
ing political  considerations,  endeavored  to  democratize 
credit.  He  relied  on  the  mass  of  the  populace,  whom 
he  considered  stronger  than  the  bankers.  From  that 
time  on,  during  the  whole  of  the  nineteenth  century 
emissions  of  rentes  by  public  subscription  rapidly  in- 
creased in  volume,  in  number  of  subscribers,  and  in  popu- 
larity. This  is  true  both  of  perpetual  and  amortisable 


173 


National    Monetary     Commission 

loans,  which  were  introduced  in  1878,  and  have  been 
negotiated  on  the  Bourse  through  the  mediation  of 
the  syndicate  of  stockbrokers  (syndicat  des  agents  de 
change)  by  the  general  paying  treasurers  of  the  Depart- 
ments. 

(59)  There  are  other  debts,  besides  those  of  the  State, 
which  have  the  character  of  public  debts;  these  are  debts 
of  departments  and  municipalities,  which  give  rise  to  a 
large   circulation    of   securities    upon   the   market.     The 
departmental  debts,  directly  concluded  and,  consequently, 
not  including  engagements  for  guaranteeing  profits  to  pri- 
vate   companies,  the  annual  charges  on  which  amount 
to  50,000,000  francs,  are  valued  at  700,000,000  francs. 
The   communal   debts  are   more   important  than    those 
of  the  departments.     They  rise  approximately  to  a  fig- 
ure slightly  above  4,095,000,000,  of  which  2,545,000,000 
fall    to   the  account   of    the  city   of    Paris  alone.      On 
December   31,    1869,   there   were   on  the  official   quota- 
tion  list   in   Paris    14  different  stocks  of    departmental 
and   municipal   loans,    representing   a   capital    of    808,- 
600,000    francs.      Their    number   at    present     (1909)    is 
58,  and   they  represent   2,300,000,000.     The   obligations 
of    the    city   of    Paris    form    the    majority   of    munici- 
pal bonds   figuring  on  the  list,  and  belong  to  different 
loans  of  the  period  between  1860  and    1906.     All  other 
loans  of  this  and  earlier  periods  have  been  amortised.    The 
number  of  certificates  in  circulation  is  4,618,205,  repre- 
senting a  capital  of  2,090,107,200  francs.     The  majority  of 
these  are  lottery  bonds. 

(60)  Trie  scope  of  this  publication  allows  us  only  to  make 
brief  mention  of  the  loans  of  colonies  and  protectorates. 


History   and   Methods   of  the   Paris   Bourse 

They  began  with  that  of  Tunis  in  1892.  Since  then,  there 
were  loans  issued  by  Algeria,  Guadeloupe,  Indo-China, 
Madagascar,  Martinique,  Occidental  Africa,  the  Reunion, 
the  protectorate  of  Annam  and  Tonkin,  and  Tunis.  The 
number  of  bonds  at  present  in  circulation  rises  to  2,286,573, 
representing  a  capital  of  816,166,500  francs. 

(61)  Brief  mention  should  be  made  also  of  foreign 
credit,  which  France  has  favored  to  a  considerable  degree, 
although  its  development  is  only  recent.  Till  1823  there 
existed  a  prohibition  against  the  dealing  of  stockholders  in 
any  other  but  royal  bonds.  All  dealings  in  foreign  secur- 
ities in  Paris  was  done  only  by  curb  brokers.  In  Decem- 
ber, 1830,  there  were  only  n  different  stocks  entered  upon 
the  official  list.a 

Under  the  Second  Empire  there  were  already  many 
important  foreign  issues  figuring  on  the  quotation  list. 
Turkey,  Austria,  Spain,  Hungary,  Egypt,  Russia,  and 
Italy  were  among  the  borrowing  governments  of  that 
period  whose  securities  prevailed  on  the  Paris  market. 

The  emissions  of  public  funds  of  foreign  countries  be- 
came still  more  numerous  during  the  period  between  1870 
and  the  present  time.  Egypt,  Hungary,  Russia,  and  even 
Japan  and  England,  are  among  those  that  issued  heavy 
loans,  and  whose  bonds  are  among  the  securities  prevailing 
on  the  Paris  Bourse. 

In  a  communication  to  the  International  Congress  of 
Transferable  Securities,  named  Les  Valeurs  Mobilises  en 
France,  M.  Thery  claims  that  it  is  impossible  to  give  a 
precise  estimate  of  the  number  and  capital  of  foreign 
securities  held  by  French  capitalists.  He  ascribes  the 


oClaudio  Jannet,  Capital,  speculation  et  finances  au  XlXcsitcle,  page  522. 
90312°—  10  -  12  175 


National    Monetary     Commission 

reason  to  the  fact  that  these  same  foreign  securities  are 
traded  in  on  many  international  great  markets  of  Europe, 
besides  Paris  and  their  original  countries;  that  these 
securities  are  in  constant  movement  on  account  of  their 
offering  of  great  inducements  of  arbitrage,  and  because  of 
real  demands  and  offers  of  French  capital — and  thus  con- 
stantly escape  every  control. 

But  yet  an  estimate  has  been  tried.  Le*on  Say  puts  the 
capital  of  the  foreign  securities  at  between  10,000,000,000 
and  1 2,000,000,000  francs.  Paul  Leroy  Beaulieu  puts  it  at 
between  12,000,000,000  and  15,000,000,000.  Neymarck 
estimates  it  at  20,000,000,000.  However,  it  is  of  little 
importance  to  know  the  exact  proportion  of  the  French  and 
foreign  funds  prevailing  on  the  French  market,  provided 
the  institutions  of  the  country  are  such  as  to  give  free 
scope  to  indigenous  demands,  and  provided  that  these 
demands  are  satisfied. 

(62)  The  first  appearance  of  shares  of  insurance  compa- 
nies on  the  official  quotation  list  of  the  stockbrokers  in 
Paris  dates  from  the  time  of  the  Restoration.  The  first 
insurance  company  was  authorized  by  an  ordinance  of 
April  22,  1818,  under  the  name  of  Compagnie  royale 
(T  assurances  maritimes,  which  has  since  become  the 
Compagnie  d'assurances  generates  maritimes.  Soon  after, 
in  1819,  there  were  formed  by  special  ordinances  one 
general  fire  insurance  and  one  general  life  insurance  com- 
pany. In  1830  we  find  already  7  insurance  companies 
on  the  official  quotation  list. 

The  insurance  companies  have  followed  during  the  nine- 
teenth century  the  general  progress  in  insurance  and  in 
the  laws  upon  joint  stock  companies.  Article  66  of  the 


176 


History   and   Methods   of  the   Paris    Bourse 

law  of  the  24th  of  July,  1867,  exempts  insurance  com- 
panies (excepting  mutual  and  fixed-premium  companies) 
from  government  supervision  or  authorization,  and  leaves 
them  free  to  form  themselves,  subject  only  to  the  general 
regulations  of  public  administration. 

According  to  a  memoir  by  M.  le  Chartier,  submitted  to 
the  International  Congress  of  Transferable  Securities  of 
1900,  out  of  327  fire  insurance,  life  insurance,  accident 
insurance,  and  maritime  insurance  companies  that  have 
been  founded  in  France  during  the  nineteenth  century,  209 
ceased  operations,  and  the  capital  lost  is  estimated  at 
692,825,000  francs,  while  the  118  companies  existing  in 
1900  had  a  lump  capital  of  485,840,000  francs.  This  does 
not  include  the  reserve  funds. 

According  to  a  report  of  M.  Neymarck  to  the  Interna- 
tional Institute  of  Statistics,  at  the  meeting  of  1907,  the 
insurance  values  figuring  on  the  official  list  on  December 
31,  1906,  were  represented  by  402,930  certificates  and  by 
a  nominal  capital  of  4,643,618,100  francs.  The  Coulisse 
had  at  the  beginning  of  1909  seven  different  insurance 
stocks,  representing  a  nominal  capital  of  54,000,000  francs. 

(63)  The  establishment  of  railroads  in  France,  as  in 
other  countries,  was  the  signal  for  a  prodigious  economic 
movement.  The  money  market  was  the  crucible  in  which 
was  molded  the  capital  permitting  of  the  formation  of 
railroad  companies. 

In  1832,  when  the  advantage  of  railroad  concessions  was 
first  understood,  many  railroad  companies  were  formed. 
After  a  law  had  been  passed  in  1842,  permitting  temporary 
concessions  and  establishing  the  eight  great  trunk  lines 
whose  construction  was  very  important  for  the  whole 


177 


National     Monetary     Commission 

country,  there  ensued  a  veritable  fever  of  railroad  building 
and  speculation.  In  six  years  6,000  kilometers  of  rail- 
road tracks  were  granted  in  concessions,  of  which  more 
than  1,250  had  been  constructed.  Speculation  increased 
so  much  that  a  law  was  passed  on  July  15,  1845,  prohibit- 
ing the  sale  of  promises  for  railroad  shares. 

(64)  The  following  revolutionary  period  of  1848  was  a 
difficult  one  for  all  kinds  of  enterprises.     Receipts  fell  off. 
The  Government  had  to  intervene  and  buy  back  the  Paris- 
Ivy  on  road;  many  companies  went  into  receivers'  hands. 
A  panic  ensued  when  the  population  had  demolished  a 
great  number  of  railroad  stations  and  bridges,  and  doubts 
arose  as  to  the  intentions  of  the  Provisional  Government 
with  regard  to  the  rentes  of  railroad  companies.     A  great 
tumble  in  the  values  of  railroad  stocks  was  the  result. 

(65)  Under  the  Second  Empire,  prompted  by  uniform 
concessions  for  a  period  of  ninety-nine  years,  the  then 
existing  27  lines,  with  concessions  of  different  duration, 
were  united  into  six  principal  great  regional  trunk  lines. 
In  1859  the  existing  concessions  contained  14,756  kilo- 
meters,   and   the   roads    in    exploitation    covered    9,074 
kilometers.     But,    following   a   commercial   panic   which 
raged  in  1857,  the  public  was  frightened  by  the  large  funds 
engaged.     The  Government  decided  to  fund  the  indebted- 
ness of  the  companies,  and  the  agreements  of  1859  were 
concluded. 

By  those  agreements  the  Government  guaranteed  4  per 
cent  interest  upon  each  of  the  less  productive  new  systems, 
and  a  minimum  of  revenue  upon  each  of  the  old  systems 
of  railroads.  Besides,  in  virtue  of  new  traffic  procured  for 
the  old  systems  by  the  creation  of  the  new  ones,  a  part  of 


178 


History   and   Methods    of  the   Paris    Bourse 

the  receipts  of  the  old  lines  was  reserved  for  the  new 
systems. 

The  credit  of  the  companies  rose  rapidly,  and  they 
could  easily  place  their  bonds  at  advantageous  rates. 
From  1859  t°  I870,  the  length  of  exploited  lines  was  in- 
creased by  8,365  kilometers,  and  the  ceded  lines  passed 
from  16,441  to  23,440  kilometers. 

After  the  crisis  of  1870  the  national  assembly,  in  spite 
of  the  difficulties  in  which  the  country  found  itself,  con- 
tinued the  work  of  construction,  and  from  1870  to  1875 
granted  not  less  than  4,680  kilometers  of  railroad  lines. 
Then  comes  the  construction  of  the  government  railroad 
system,  as  a  consequence  to  the  taking  over  of  the  second- 
ary companies  that  failed.  Then  also  comes  the  Freycinet 
plan  of  the  creation  of  3  per  cent  amortisable  rentes. 
The  plan  was  too  vast  for  accomplishment,  since  it  was 
evident  that  the  Government  was  unable  to  build  10,000 
kilometers  in  the  presence  of  the  lines  that  had  been  given 
rank  by  the  law  of  July  17,  1875. 

(66)  Then  came  the  famous  agreements  of  1883,  so  much 
decried,  which,  however,  permitted  the  railroad  industry 
to  begin  its  ascent  to  the  heights  on  which  it  stands 
to-day. 

By  these  agreements,  the  six  great  companies  were  de- 
clared the  grantees  of  1 2,687  kilometers  of  railroad  tracks — 
under  exploitation,  in  construction,  and  to  be  constructed. 
The  distinctions  between  old  and  new  roads  were  sup- 
pressed. The  receipts  and  expenses  were  kept  in  one 
account.  From  the  receipts  the  companies  had  previously 
to  deduct  the  sum  necessary  to  assure  the  interest  on 
their  loans  and  the  payment  of  dividends  guaranteed  by 
the  Government  to  their  shareholders. 

179 


National     Monetary     Commission 

(67)  By  the  side  of  the  great  systems,  there  were  formed 
a  large  number  of  systems  of  local  interest,  whose  aim 
was  to  connect  localities  of  secondary  importance  with 
one  another  or  with  the  great  lines.     The  development 
of  these  secondary  lines  was  promoted  first  by  the  law  of 
1665  which  granted  state,  departmental,  and  municipal 
subsidies;  but  to  a  much  greater  extent  by  the  law  of 
1880    and    the    supplementary    decree   of    1881,    which 
replaced  the  subsidies,  that  promoted  speculation  a  with- 
out development,  by  mere  guaranties  of  profits  in  case 
of  actual  exploitation  of  the  roads  in  question. 

At  the  same  time  in  the  interior  of  the  cities  there  de- 
veloped the  use  of  mechanical  traction,  replacing  animal 
traction.  Paris  set  the  example,  and  the  formation  of 
its  system  of  tramways  called  " de  penetration"  gave  birth 
to  a  great  number  of  large  companies.  These  traction 
companies  extend  their  activity  also  to  the  province,  and 
the  creation  of  affiliations  and  trusts,  toward  the  end  of 
the  nineteenth  century,  was  the  occasion  of  a  considerable 
issue  of  paper. 

At  present  the  official  quotation  list  mentions  not  less 
than  60  secondary  railroad  or  tramway  companies  for 
France  and  its  colonies. 

(68)  The  French  financial  market  was  to  a  very  great 
degree  concerned  with  foreign  railroads.     In  1837  there 
appeared  for  the  first  time  on  the  Coulisse,  and  later  on 
the  Parquet,  shares  of  a  foreign  railroad  company.     The 
political  and  financial  order  of  events,  as  well  as  the  con- 
dition of  affairs  on  the  Bourse  at  that  time,  did  not  permit 
a  very  great  development  in  transactions  in  securities  of 

a  See  an  article  by  M.  Gomel  in  the  Dictionnaire  d' Economic  Politique  of 
L6on  Say. 

1 80 


History   and   Methods   of  the   Paris   Bourse 

foreign  railroads.  But  the  Rothschild  firm  was  interested 
in  the  first  railroad  companies  for  the  development  of  the 
north  Italian  and  south  Austrian  regions,  which  later 
formed  the  Compagnie  des  Chemins  de  fer  Lombards,  whose 
shares  appeared  on  the  quotation  list  in  1856.  From  now 
on,  under  the  impulsion  of  the  newly  formed  Credit  Mo- 
bilier,  the  financial  market  becomes  more  and  more  in- 
terested in  a  large  number  of  foreign  railroads.  In  1858 
a  decree  of  May  22  announced  the  conditions  which  foreign 
railroad  companies  have  to  fulfill,  in  order  to  become  ad- 
missible to  the  official  quotation  list  of  the  stockbrokers. 

(69)  According  to  a  report  by  M.  Alfred  Neymarck  to 
the  International  Institute  of  Statistics  (session  1 907) ,  the 
securities  of  railroads  and  street  railways,  figuring  upon  the 
official  quotation  list  on  December  31,  1906,  represented  a 
capital    of    20,167,834,000    francs,    in    5,843,608    shares. 
There  were  in  all  71  companies,  32  of  which  were  for  for- 
eign railroads,  and  represented  a  capital  of  7,541,329,600 
francs. 

(70)  We  have  dwelt  on  the  creation  and  development 
of   railroads,  because  they  have  marked  in  a  very  strong 
way  the  industrial  progress  of  France  and  the  develop- 
ment of  credit  in  its  relations  to  the  Bourse.     Besides,  also, 
numerous  companies  were  formed,  from  1820  to  1852,  for 
the  exploitation  of  iron  mills  and  various  manufactories, 
of  mines,  and  of  transportation.     The  Credit  Fancier  and 
the  Credit  Mobilier  were  among  these  associations.     Both 
of  these  companies,  in  cooperation  with  many  other  con- 
temporary ones,  considerably  developed  the  transferable 
securities.     From    1830    to    1838    many    limited-liability 
companies  in  shares  (societes  anonymes)  were  formed  by 

181 


National    Monetary     Commission 

a  sort  of  degeneration  of  the  "  commandite"  form  of 
company  (societe  en  commandite),  in  which  the  managers, 
or  active  partners,  were  under  unlimited  liability."  The 
securities  of  the  companies  formed  on  this  new  basis  ap- 
peared on  the  Bourse  in  great  numbers  since  i832.6 

The  most  diverse  industrial  enterprises  were  thrown  into 
this  form  of  company.  The  promoters  of  doubtful  enter- 
prises put  at  their  head  men  of  straw,  in  order  to  avoid 
personal  responsibility.  The  shares  of  certain  enterprises 
reached  fantastic  prices  (over  tenfold  their  par  value), 
owing  to  exaggerated  expectations  of  shareholders.  Stock- 
jobbing was  rife  on  the  Bourse.  But  most  of  these  inse- 
cure undertakings  were  swept  away  by  the  crisis  of  1838. 

The  formation  of  lottery  combinations  also  belongs  to 
that  period. 

(71)  We  come  now  to  the  era  of  the  great  credit  associa- 
tions. 

The  Comptoir  d'Escompte  (national  discount  bank) 
dates  from  the  period  of  turmoil  of  1848.  Its  powers 

°The  French  law  at  present  recognizes  four  forms  of  commercial  compa- 
nies: i.  The  partnership  (la  societe  en  nom  collectif},  in  which  the  partners 
are  responsible  for  debts  contracted  by  the  company  to  the  whole  extent 
of  their  personal  estate.  2.  The  "commandite  "  form  of  company  (la  societe 
en  commandite) ,  in  which  one  or  several  members  are  responsible  with  the 
whole  of  their  estates,  while  several  others  are  responsible  only  up  to  a  sum 
which  they  announce  in  the  contract.  The  second  category  of  partners 
take  the  name  bailleurs  de  fonds,  or  commanditaires  (sleeping  or  silent  part- 
ners). 3.  The  "commandite"  in  shares  (commandite  par  actions),  in  which 
the  commandite  members  are  shareholders  in  the  ordinary  commercial 
sense,  involving  liability  only  to  the  amount  of  their  shares.  The  member 
or  members  responsible  with  all  their  estates  are  called  gerants  (managers, 
directors).  4.  The  limited-liability  company  in  shares,  in  whic"h  all  the 
members  are  only  shareholders,  liable  to  the  amount  of  their  shares,  and 
which  are  managed  by  one  or  several  administrators  by  proxy  (mandataires 
des  actionnaires) . 

&M.  Jannet.     Le  Capital,  la  Speculation  et  la  Finance,  page  510. 


182 


History   and   Methods   of  the   Paris    Bourse 

spread  to  such  an  extent  that  at  the  present  time  it  is  one 
of  those  establishments  which  are  known  as  the  great  finan- 
cial magazines,  and  the  most  conspicuous  of  which  are  the 
Credit  Lyonnais,  the  Societe  Generate,  and  the  Credit  In- 
dustrial et  Commercial,  all  of  which  were  founded  during 
the  Second  Empire.  The  principle  which  governed  the 
founding  of  the  Comptoir  d'Escompte  goes  back  to  a  period 
previous  to  1848. 

After  a  commercial  panic  in  1827-28  an  attempt  was 
made  to  found  a  discount  bank  in  Paris,  intended  to  serve 
as  an  intermediary  between  the  public  and  the  Bank  of 
France.  Large  sums  of  money  were  advanced  to  it  by  the 
treasury  and  the  Bank  of  France;  it  was  thus  able  to  dis- 
count bills  of  two  signatures.  But  this  institution  failed 
in  April,  1832,  practically  before  it  had  time  to  work. 

The  deplorable  condition  of  the  financial  market  in  1848, 
and  the  many  financial  catastrophes  caused  by  the  revo- 
lutionary turmoil,  induced  the  Provisional  Government  to 
establish  a  number  of  discount  banks  all  over  France,  un- 
der the  general  name  of  Dotation  du  petit  commerce.  The 
basis  and  the  main  statutory  provisions  governing  them 
all  were  as  follows:  Private  persons,  the  State,  and  mu- 
nicipalities were  called  upon  to  furnish  each  one-third  of 
the  capital  of  the  banks.  The  third  coming  from  private 
persons  was  to  be  fully  paid  in  and  represented  by  shares; 
the  other  two-thirds  were  to  be  represented  by  treasury 
bonds  and  municipal  obligations  deposited  in  the  treasury 
of  the  bank.  Besides  this  capital,  the  banks  received  from 
the  State  at  the  time  of  their  formation  a  subventitious 
loan  in  specie,  at  the  interest  of  4  per  cent  for  the  State's 
benefit.  Almost  all  these  loans  had  been  reimbursed  dur- 


183 


National    M  o  n  et  ar  y     Commission 

ing  the  first  three  years.  The  chief  purpose  of  all  these 
banks  was  discount;  they  could,  however,  add  to  this  all 
operations  tending  to  facilitate  the  circulation  of  notes,  such 
as  the  collection  of  bills  of  correspondents,  the  collection 
of  debts  for  departments  or  foreign  states,  the  opening  of 
accounts,  etc.  The  city  of  Paris,  naturally,  was  the  first 
to  be  endowed  with  this  institution;  a  decree  of  March  7 
created  the  Comptoir  National  d'Escompte  de  Paris. 
Many  towns  soon  followed  suit  and  gave  birth  to  similar 
institutions.  Their  number  was  67,  and  they  represented 
a  capital  of  130,449,500  francs  in  shares.  The  Paris  in- 
stitution was  reconstituted  under  the  old  name,  after  liqui- 
dation in  1889,  owing  to  mismanagement  of  its  director- 
general,  M.  Denfert-Rochereau. 

The  original  capital  of  40,000,000  francs,  divided  into 
80,000  shares  of  50  francs,  was  now  increased  to  80,000,000 
francs.  Later  it  was  successively  reduced  to  75,000,000, 
increased  to  100,000,000  (1895),  and  to  150,000,000  (1900). 
Only  recently  (1909)  it  was  increased  to  200,000,000. 

(72)  We  come  now  to  the  founding  of  the  Credit  Fonder 
and  the  Credit  Mobilier.  Both  of  these  associations  were 
founded  in  1852. 

Simultaneously  with  the  construction  of  railroads  in 
France,  which  was  the  occasion  of  an  extensive  demand  for 
credit,  people  decided  to  resort  to  credit  also  for  the  exploita- 
tion of  landed  property  and  the  development  of  agriculture. 

Real  estate  at  that  time  experienced  the  greatest 
difficulties  in  procuring  capital  at  moderate  rates  of 
interest.  The  main  reasons  were  the  uncertainty  of  the 
real  estate  regime,  and  the  inability  of  the  borrower  to 
pay  off  at  short  maturity. 

184 


History    and   Methods    of  the   Paris    Bourse 

The  solution  of  the  problem  consisted  in  putting  an 
intermediary  between  the  lender  and  the  borrower,  who, 
on  the  one  hand,  had  powerful  means  of  investigating 
the  validity  of  the  proposed  mortgage,  and,  on  the  other 
hand,  could  substitute  himself  for  the  borrower  in  the 
emission  of  securities  at  long  maturity. 

With  this  aim  in  view,  as  formulated  by  the  decree 
of  February  28,  1852,  there  was  founded  in  Paris  (with  a 
charter  for  twenty-five  years,  under  the  jurisdiction  of 
the  Cour  d'appel)  the  Banque  Fonder e  de  Paris,  Sodete 
de  Credit  Fonder  (Real  Estate  Bank,  Mortgage-Loan 
Company)  with  a  capital  of  25,000,000  francs. 

In  December,  of  the  same  year,  the  Paris  institution 
amalgamated  with  similar  institutions  which  had  been 
established  earlier  in  the  same  year  in  the  various  depart- 
ments, and  formed  one  company,  known  as  the  Credit 
Fonder  de  France.  This  new  company  received  a  subsidy 
of  10,000,000  francs  from  the  Government;  its  capital 
increased  to  60,000,000  francs,  and  it  bound  itself  to 
advance  loans  under  certain  conditions.  A  first  loan  of 
250,000,000  francs  was  issued,  which  met  with  but  mid- 
dling success. 

By  two  decrees,  of  1853  and  1856,  respectively,  the 
great  institution  was  granted  certain  privileges,  and  placed 
under  the  strict  supervision  of  the  state.  From  that 
time  on  the  Credit  Fonder  rapidly  developed.  In  1860 
it  founded  the  Credit  Agricole,  having  for  its  object  the 
furthering  of  the  progress  of  agriculture.  But  the  new 
company  undertook  imprudent  transactions  which  led 
to  its  absorption  by  the  Credit  Fonder  (1877).  Later, 
in  1882,  the  institution  bought  up  another  company, 


185 


National    Monetary     Commission 

the  Banque  Hypothecate,  which  had  been  established 
three  years  previously  with  the  purpose  of  doing  the 
same  kind  of  business  as  the  Credit  Fonder,  but  without 
possessing  the  same  privileges.  At  the  end  of  the  nine- 
teenth century  the  Credit  Fonder  considerably  developed 
its  activity,  and  its  capital  was  successively  increased  to 
30,000,000  (1862),  60,000,000  (1862),  90,000,000  (1869), 
130,000,000  (1877),  and  finally,  in  1882,  as  a  result  of 
the  amalgamation  with  the  Banque  Hypothecate,  to 
200,000,000  francs,  at  which  figure  it  now  stands. 

The  operations  of  the  Credit  Fonder  are  of  two  kinds: 
i,  loans  for  short  term,  reimbursable  in  ten  years  at  most, 
and  2,  loans  for  long  term,  payable  by  annuities.  In 
case  of  communal  loans  (where  the  borrower  is  a  city 
or  a  department)  the  social  capital  must  equal  one- 
twentieth  of  the  bonds  in  circulation. 

From  1853  to  1908  the  Credit  Fonder  has  granted  152,622 
hypothecary  loans  for  a  total  of  5,698,000,000  francs,  of 
which  some  are  for  a  term  of  fifty  to  fifty-nine  years,  and 
others,  of  sixty  to  seventy-five  years.  The  communal 
loans  since  1860  have  been  38,128  in  number,  for  a  sum  of 
1,094,000,000  francs.  In  the  total  we  obtain,  since  1853, 
190,740  loans  for  the  sum  of  9,501,000,000  francs. 

Of  this  total  sum  there  remained  unpaid  on  December 
31,  1908,  the  sum  of  2,118,348,000  francs  of  the 
hypothecary  loans  and  1,852,783,000  francs  of  the  com- 
rAunal  loans. 

The  amount  of  real  estate  bonds  for  the  same  period 
was  2,480,000,000  francs,  and  of  communal  bonds, 
1,712,000,000. 


186 


History    and    Methods    of  the    Paris    Bourse 

(73)  While   the   Credit   Fonder   de  France   was   being 
established,  there  was  formed  in  Paris  a  Societe  Generate 
de   Credit   Mobilier.     A   decree   of   November    18,    1852, 
authorized  the  creation  of  this  incorporated  joint-stock 
company;    it    was    entirely    free    from    all    government 
connections. 

The  object  of  this  general  credit  institution  was  to 
establish  industrial  and  financial  companies.  It  sub- 
scribed shares  and  bonds  of  different  industrial  and  finan- 
cial enterprises,  and  in  disposing  of  them  in  the  way  it 
could,  it  brought  to  bear  the  publicity  and  mechanism  of 
bourse  operations.  In  issuing  bonds,  in  order  to  work 
out  its  own  programme,  it  had  to  contribute  powerfully 
to  the  development  of  transferable  securities.  It  was 
constituted  with  a  capital  of  60,000,000  and  with  the 
power  of  issuing  bonds  for  600,000,000  francs. 

Between  1852  and  1867  the  Societe  Generate  de  Credit 
Mobilier  succeeded  in  establishing  and  aiding  numerous 
influential  and  powerful  companies.  Among  these  were 
railroad,  gas,  maritime,  loan,  and  insurance  companies, 
banking  institutions,  etc.  It  was  reconstituted  in  1871 
under  the  name  of  Societe  de  Credit  Mobilier.  In  1902 
it  combined  with  the  Office  des  Rentiers,  and  another 
company  was  then  formed,  by  the  name  of  Credit  Mobilier 
Francais,  with  a  capital  now  amounting  to  45,000,000 
francs. 

(74)  Upon  the  model  of  the  Credit  Mobilier  numerous 
other  companies  and  discount  banks  have  been  estab- 
lished since  that  time.     The  Credit  Industriel  et  Commercial, 
the  Credit  Lyonnais,  and  the  Societe  Generate,  with  the 
original  capitals  of  60,000,000,  20,000,000,  and  1 20,000,000 


187 


National    Monetary     Commission 

francs,  respectively  (at  present  100,000,000,  250,000,000, 
and  400,000,000),  are  types  of  these  institutions.  All  of 
them  little  by  little  went  over  to  the  practice  of  issuing 
securities  and  participating  in  financial  operations  on  a 
grand  scale. 

(75)  The  impetus  given  to  transferable  securities  by  the 
commercial  credit  institutions,  as  they  were  then  known, 
ought  not  to  make  us  lose  sight  of  the  valuable  work 
done  in  this  respect  by  the  Banque  de  France.  (See  note 
to  No.  55.) 

Its  services  to  national  commerce  have  become  more 
and  more  valuable  in  the  same  measure  in  which  its 
powers  and  privileges  have  been  gradually  broadened 
and  extended  since  1808.  It  advanced  money  on  pub- 
lic notes  remitted  for  discount;  it  loaned  money  on 
deposits  of  French  rentes,  of  shares  and  bonds  of  rail- 
road companies,  of  the  bonds  of  the  city  of  Paris.  Later 
it  undertook  to  issue  and  to  dispose  of  bonds  for  account 
of  French  railroad  companies,  which  has  brought  them 
in  an  amount  of  1,200,307,500  francs.  Finally,  it  is 
known  that  the  bank  undertakes  the  safe-keeping  of 
securities.  This  service,  which  in  1860  was  utilized  by 
18,226  depositors  for  securities  representing  916,000,000 
francs,  has  not  stopped  growing.  In  1890  there  were 
46,558  depositors  for  a  quantity  of  securities  represent- 
ing 3,988,000,000  francs.  At  the  end  of  1908  there  were 
94,998  depositors,  and  7,646,000,000  francs  in  securities 
were  deposited.  In  1895  the  Banque  de  France  decided 
to  accept  bourse  orders,  which  it  would  transmit  to  the 
financial  markets  for  account  of  its  clients.  In  1908  it 
transmitted  98,721  orders  for  500,000,000  francs  in  capital. 


188 


History   and   Methods   of  the   Paris   Bourse 

(76)  The  great  impetus  which  was  given  to  the  finan- 
cial activity  of  the  period  between  1876  and  1881  by 
the  successful  loans  launched  by  the  French  Govern- 
ment for  the  paying  of  its  war  indemnity  of  5,000,000,000 
francs,  and  which  expressed  itself  in  the  establishment 
of  many  powerful  financial  institutions  of  a  private 
character,  was  stopped  by  the  crash  of  the  Union  Generate. 
The  Union  Generate  was  founded  in  1878  with  a  finan- 
cial, political,  and  religious  programme.  The  political 
programme,  it  may  be  said,  was  carried  out.  But  the 
commercial  enterprises  set  on  foot  by  the  Union  Generate 
were  not  all  of  the  most  fortunate  kind;  only  a  few 
succeeded  and  became  prosperous.  The  political  and 
religious  programme  consisted  in  supplanting  the  Jewish 
and  Protestant  financiers  upon  the  field  of  financial  emis- 
sions, and  in  serving  at  one  and  the  same  time  the 
royalist  cause  in  France,  and  the  papal  cause  in  Italy. 

The  pursuit  of  this  plan  involved  the  need  of  large 
funds  rapidly  acquired,  and  the  Union  Generate  under- 
took a  campaign  for  a  rise  upon  its  own  shares,  in  order 
to  realize  an  increase  of  its  capital  and  dividends  by 
forcing  the  prices  of  its  stocks  as  high  as  possible.  It 
tried  to  do  this  by  buying  up  its  own  securities,  for  which 
the  funds  of  the  depositors  were  freely  used.  In  this 
way  the  capital  of  the  Union  Generate  was  increased 
from  25,000,000  to  100,000,000  francs,  and,  as  the  new 
funds  served  to  further  pursue  this  campaign  for  a  rise, 
the  shares  rose  to  unwarrantably  high  prices.  People 
of  all  conditions  eagerly  bought  and  sold  again  the  stocks 
of  the  Union  Generate  and  of  the  enterprises  it  created, 


189 


National    Monetary     Commission 

until  their  aggregate  value  surpassed  the  billion  mark. 
The  mania  for  investment  spread  to  all  financial  circles. 

Finally,  however,  a  reaction  set  in.  Shares  of  the 
Union  Generate  began  to  fall.  On  January  10,  1882, 
the  shares  were  listed  3,020  francs;  on  January  16, 
2,750  francs;  on  January  18,  2,400  francs;  on  January 
19,  1,300,  and  on  January  27,  900  francs.  On  the  28th 
of  January  payment  was  suspended,  and  the  shares 
fell  to  600;  on  the  next  day  they  were  450.  On  January 
30  the  administrative  board  asked  the  court  to  appoint 
a  trustee.  On  February  i,  MM.  Bontoux  and  Feder — 
the  former  president  of  the  administrative  board  and 
the  latter  a  director — were  arrested. 

Failure  of  the  Union  Generate  had  grave  consequences. 
The  Parquet  of  the  stockbrokers  of  Lyon  was  unable 
to  pay.  Out  of  30  stockbrokers,  1 4  owed  65,000,000  francs 
to  their  associates.  Debtors  and  creditors  alike  were  in 
great  straits.  A  judicial  liquidation  took  place,  and  the 
creditors  received  bonds  which  the  Syndical  Chamber  of 
Lyon  sells  every  year  at  auction.  The  stockbrokers  of  Nice 
were  also  caught  in  the  panic,  and  their  Parquet  was  sup- 
pressed by  a  decree  of  the  29th  of  January,  1889.  At  Paris 
the  situation  was  extremely  serious.  The  stockbrokers 
owed  175,000,000  francs  to  their  clientage.  The  gravity 
of  the  situation  was  enhanced  by  the  resulting  threatening 
condition  of  the  treasury.  The  conversion  of  the  5  per 
cent  rentes  had  long  since  been  under  consideration;  but 
in  this  disorganized  condition  of  the  market  the  bankers 
and  the  commercial  credit  associations  could  not  proceed 
with  a  single  emission.  They  had  invested  large  sums  in 


190 


History   and   Methods   of  the   Paris   Bourse 

"continuations"  (reports).  What  was  going  to  happen 
if  the  carried-over  securities  should  remain  on  their  hands  ? 

The  Banque  de  France  then  advanced  80,000,000  francs 
to  the  Syndical  Chamber  of  the  stockbrokers.  The  State 
also  intervened,  and  effected  "continuations"  for  the 
sum  of  165,000,000  francs  for  the  February  settlement. 
Stocks  were  carried  over  from  month  to  month  during  a 
period  of  seven  months. a  As  a  result  of  this  event  the 
market  was  so  completely  disorganized  that  for  some 
months,  and  even  for  some  years,  hardly  any  transactions 
of  a  certain  speculative  range  could  be  carried  through. 

The  total  loss  in  values  of  listed  securities  of  that  period 
is  estimated  at  4,000,000,000  francs. 

(77)  With  the  downfall  of  the  Union  Generate  there 
began  a  series  of  failures,  liquidations,  and  reorganiza- 
tions of  financial  companies  and  banking  institutions, 
which  ended  in  the  elimination  of  a  great  number  of  such 
as  were  weak  either  on  account  of  unwarranted  specu- 
lation and  mismanagement,  or  on  account  of  irregular 
constitution  and  distribution  of  fictitious  dividends. 
Toward  the  beginning  of  the  twentieth  century  there 
remained  only  the  very  strongest,  which  withstood  the 
storm  of  the  crisis  by  virtue  of  powerful  resources  and 
prudent  management.  These  succeeded  in  immensely 
increasing  their  funds  and  their  means  of  activity.  They 
solicited  deposits,  established  branch  offices  in  the  prov- 
inces and  even  abroad,  and  practised  extensively  discounts 
of  commercial  paper,  opening  of  accounts,  investing  of 
their  funds  in  "continuations,"  and  especially  issuing  of 

°  Vide  Le'on  Say,  Les  interventions  du  Tresor  &  la  Bourse  depuis  100  ans; 
Annales  de  VEcole  des  Sciences  Politiques,  1888. 

90312° — 10 13  191 


National    M on  et ar y     Commission 

transferable  securities.  They  have  supplanted  the  small 
banker  and  discounter,  who  would  charge  exorbitantly  for 
their  services  to  commerce.  But  yet  they  have  not  entirely 
displaced  the  smaller  banking  institutions,  nor  the  large 
private  banker,  doing  business  on  his  own  personal  account. 
These  are  still  doing  a  vast  amount  of  business  inde- 
pendently. It  is  true  that  there  is  a  preponderance 
of  large  companies,  but  this  preponderance  does  not  exist 
through  a  legal  monopoly.  It  has  been  claimed  that  the 
four  large  credit  companies,  the  Comptoir  d'Escompte,  the 
Credit  Lyonnais,  the  Societe  Generate,  the  Comptoir  Indus- 
triel  et  Commercial,  to  which  are  joined  for  this  purpose 
the  Banque  de  Paris  et  des  Pays-Bas,  the  Banque  de  I' Union 
Parisienne,  and  the  Banque  Francaise  pour  le  Commerce  et 
V Industrie,  are  enjoying  a  monopoly  as  a  matter  of  fact. 
This  is  not  so,  however,  for  numerous  issues  are  made  out- 
side of  these  large  companies.  A  number  of  smaller 
banks  and  credit  companies,  not  included  in  the  above 
list,  handle  some  very  important  issues,  even  if  they  are 
secondary. 

(78)  At  the  end  of  December,  1908,  the  number  of 
French  credit  companies  listed  on  the  financial  market  was 
about  37,  representing  a  nominal  capital  of  1,492,000,000 
francs. 

M.  Alfred  Neymarck,  in  his  report  to  the  Institut  Inter- 
national de  Statistique,  session  of  1907,  estimated  at  155,- 
000,000,000  francs  the  value  of  the  transferable  securities 
in  negotiation  in  France  on  December  31,  1906.  One 
hundred  and  fifty  billions  belonged  to  the  Paris  market 
alone,  of  which  about  65,000,000,000  were  in  French 
securities,  67,000,000,000  in  foreign  securities  on  the 


192 


History   and   Methods   of  the   Paris   Bourse 

official  market,  and  18,000,000,000  on  the  Coulisse  (marche 
en  banque).  Of  home  securities — the  value  of  French 
rentes  is  estimated  at  24,000,000,000  francs;  of  bonds 
of  the  city  of  Paris,  of  treasury  bonds,  including  those  of 
Departments  and  colonies,  at  3,069,000,000;  insurance 
securities  are  valued  at  702,000,000;  those  of  the  Credit 
Fonder,  at  4,447,000,000;  of  banks  and  credit  companies, 
at  3,101,000,000;  of  the  great  railroad  and  navigation 
companies,  at  24,268,000,000;  of  railways  and  tram- 
ways, at  2,200,000,000;  of  electricity,  iron  mills,  foun- 
dries, and  coal  mines,  at  2,463,000,000,  etc.  Of  the 
foreign  securities,  Russian  securities  are  valued  at  about 
10,000,000,000;  divers  other  government  funds,  at 
47,000,000,000;  railroad  securities,  at  about  6,000,000,000. 
In  1880  the  total  of  the  transferable  securities  circulating 
in  France  could  be  estimated  at  70,000,000,000,  made  up 
as  follows:  Forty-five  billion  five  hundred  million  of 
French  securities,  15,000,000,000  of  foreign  securities,  and 
10,000,000,000  of  securities  from  the  departmental  mar- 
kets and  from  the  Coulisse.  The  rapid  expansion  of 
transferable  securities  after  the  crisis  of  1882  did  not 
take  place  without  serious  setbacks  from  the  deprecia- 
tion in  value  of  a  great  number  of  securities,  following 
each  new  failure  or  liquidation.  The  movement  was 
interrupted  and  checked  in  1889,  1890,  1895,  and  in  1901. 
(79)  As  we  have  seen,  public  credit  was  the  outcome  of 
the  call  for  capital.  And  the  agreement  entered  into  by 
the  borrower — State,  or  private  enterprise — and  the 
lender,  was  made  manifest  through  a  deed — the  trans- 
ferable security.  The  transferable  security,  in  its  turn, 
owing  to  the  ease  with  which  it  can  be  distributed,  de- 

193 


National    Monetary     Commission 

veloped  the  public  credit.  But,  in  order  that  the  double 
phenomenon  be  easily  produced,  it  was  necessary  that 
there  should  exist  a  public  market  where  the  one  who 
wishes  to  sell  his  securities  and  the  one  who  desires  to 
buy  them  might  meet  each  other.  No  doubt  the  seller 
and  the  purchaser  do  not  necessarily  require  a  public 
market,  and,  in  practice,  it  happens  that  some  trades  are 
carried  on  without  the  merchandise  being  offered  or  asked 
for  on  an  exchange.  But  public  markets  are  none  the  less 
useful,  and  their  accessory  functions  plainly  stimulate  the 
production  and  circulation  of  wealth. 

The  bourse  des  valeurs  (stock  exchange)  is  for  securities 
what  the  bourse  des  marchandises  (commercial  exchange) , 
the  fair,  or  the  market,  is  for  traffic  in  merchandise. 

The  financial  market  is  an  accessory  organ,  because  it 
has  no  part  in  the  phenomenon  of  the  creation  of  securi- 
ties, or  in  the  contract  which  puts  them  in  circulation. 
When  a  State  borrows,  it  issues  a  certificate  to  anyone 
who  brings  it  money.  The  same  is  done  by  any  financial 
institution  which  brings  out  an  issue.  The  accessory 
organ  is  nevertheless  useful  in  a  high  degree,  because  if  it 
did  not  exist,  the  public  would  decline  to  subscribe  for 
securities,  which  it  could  not  easily  dispose  of  in  case  of 
need  of  money. 

(80)  This  consideration  leads  us  to  the  examination 
of  the  French  financial  market,  taken  as  it  is.  Is  it  a 
tool  destined  to  facilitate  the  distribution  of  securities? 
Does  it  fulfill  its  mission  well? 

It  can  not  be  denied  that  it  has  fulfilled  it,  but  it  is 
quite  clear  that  it  could  fulfill  it  only  on  account  of  enjoy- 
ing the  widest  freedom. 


194 

• 


History   and   Methods   of  the   Paris   Bourse 

The  financial  market  was  instituted  in  the  year  IX  of 
the  Republic,  under  such  conditions  that,  if  it  had  pre- 
served its  shackles,  there  would  either  have  been  no  finan- 
cial market,  or  the  financial  market  would  have  insti- 
tuted itself  in  spite  of  the  law. 

Is  it  possible  to  imagine  a  financial  market  resting 
upon  60  men,  appointed  by  the  Government,  who  are 
forbidden  to  do  business  for  their  own  account,  to  have 
partners  or  representatives,  to  guarantee  their  clients' 
transactions,  to  negotiate  securities  without  having  first 
received  the  securities  from  the  sellers  and  the  money 
from  the  buyers,  and  to  quote  foreign  government  securi- 
ties? One  of  two  things:  Either  the  public  market  will 
establish  itself  outside  of  these  60  men,  or  these  60  men 
will  prevent  the  establishment  of  the  public  market. 

It  is  the  first  of  these  two  phenomena  which  occurred. 
On  the  one  hand,  the  Coulisse  injected  into  the  public 
market  the  activity  it  required,  and  on  the  other  hand, 
the  corporation  of  the  stockbrokers  (agents  de  change), 
profiting  by  the  activity,  gradually  obtained  the  "liber- 
ties," without  the  granting  of  which  it  would  have  disap- 
peared. The  curb  brokers  (coulissiers)  dealt  for  future 
delivery  for  their  own  account  and  for  the  account  of 
their  customers;  they  could  negotiate  foreign  securities. 
They  transferred  their  gatherings  from  the  boulevard  to 
the  Bourse  and  from  the  Bourse  to  the  boulevard  at  any 
hour  of  the  day,  or  even  of  the  evening.  They  charged 
less  for  their  services  to  their  customers  than  the  stock- 
brokers. The  latter  protested. 

The  Governments  let  them  protest;  then,  as  by  degrees 
the  stockbrokers,  taking  pattern  from  the  coulissiers,  also 


195 


National    Monetary     Commission 

began  to  transact  time  bargains  and  to  deal  in  foreign  se- 
curities, the  authorities  granted  them  all  that  had  earlier 
been  forbidden  to  them,  without,  however,  granting  them 
the  abolition  of  the  Coulisse.  In  1898,  however,  a  retro- 
gressive phenomenon  took  place.  We  shall  explain  it  and 
ascertain  its  meaning  later. 

Thus  is  explained,  how  the  Coulisse  was  tolerated  during 
the  nineteenth  century,  and  what  led  to  the  successive 
laws  which  somewhat  altered  in  the  details  of  certain 
operations  the  work  of  the  lawmaker  of  the  year  X. 

(81)  But  first  we  must  make  mention  of  a  special  meas- 
ure passed  in  1816  for  the  benefit  of  the  stockbrokers. 
At  that  time  they  became  the  owners  of  their  offices,  as 
they  were  prior  to  the  revolution.  Since  the  year  IX  they 
had  been  appointed  by  the  Government  and  had  held  a 
commission  subject  to  repeal.  The  law  now  intended  to 
permit  them  to  introduce  their  successors  with  the  consent 
of  the  Government. 

The  right  of  introduction  is  practically  an  article  for 
sale.  The  stockbroker,  on  retiring,  does  not  sell  his  office, 
but  he  sells  to  his  successor  the  right  of  introduction. 

This  measure  was  brought  in  under  the  following  con- 
ditions: The  budget  for  the  year  1815  having  shown  an 
excess  of  expenses  of  133,433,000  francs,  the  Government 
of  the  restoration  had  to  look  around  for  resources  to 
meet  them. 

Therefore,  by  the  law  of  April  28,  1816,  the  stock- 
brokers, as  well  as  notaries,  barristers  practicing  before 
the  court  of  cassation  (auocats  a  la  Cour  de  cassation), 
lawyers,  court  clerks,  bailiffs  ("  huissiers,"  those  who  pro- 
test commercial  paper,  serve  writs,  etc.),  commercial 


196 


History   and   Methods   of  the   Paris   Bourse 

brokers,  and  appraisers,  acquired  the  right  of  introducing 
their  successors  in  consideration  of  an  additional  surety 
bond,  aggregating  40,000,000  francs  for  the  totality  of 
these  ministerial  offices. 

It  is  that  right,  conferred  on  ministerial  officers,  to 
present  their  successors — a  right  which  the  beneficiaries 
may  sell — which  has  been  considered  as  a  return  to  the 
system  of  vendibility  of  government  offices.  That  system 
has  been  the  object  of  much  criticism.  Notably,  it  has 
the  grave  defect  of  placing  the  State  in  a  position  where 
eventually  it  may  have  to  indemnify  the  holders  in  a  pro- 
portion ever  increasing,  unless  it  permit  the  evil  to  be 
perpetuated  on  account  of  its  inability  either  to  indem- 
nify the  holders  or  to  redeem  the  offices. a 

The  law  of  1816  can  not  be  placed  among  those  which 
were  intended  to  render  the  financial  market  flexible. 

a  To  this  Rossi  has  called  attention  in  a  masterly  way.  (Cours  d'Eco- 
nomie  Politique,  t.  i,  p.  309.) 

"The  more  we  advance,"  he  said  as  far  back  as  1840,  "the  more  the 
evil  increases.  On  the  day  the  "Government  wishes  to  recover  its  full 
freedom  of  action,  it  would  have  but  two  serious  disadvantages  to  choose 
from — some  sort  of  revolutionary  spoliation,  or  else  an  enormous  sacrifice 
of  the  public  treasury;  and  this,  on  account  of  having  permitted  the  trans- 
formation of  a  personal  function  into  a  transferable  property,  and  of  hav- 
ing permitted,  in  part  at  least,  and  under  another  form,  the  revival  of  an 
old  custom,  which  had  been  born  from  the  miseries  of  the  royal  treasury 
under  Francis  I,  and  should  have  remained  buried  forever  with  the  fee  estates, 
the  wardenships,  the  entails,  and  the  serfdoms  of  the  old  regime.  The  in- 
crease of  surety  bonds,  which  took  place  in  1816,  did  not  warrant  that 
return  toward  the  past." 

Therefore,  that  strange  compensation  was,  it  seems  to  me,  more  a  pre- 
text than  a  motive  for  that  partial  restoration  of  an  old  abuse,  against 
which,  even  under  the  old  regime,  powerful  voices  arose. 

"'It  is  a  gangrene,'  exclaimed  the  Duke  of  St.  Simon,  in  speaking  of  the 
venality  of  military  appointments,  '  which  for  a  long  time  has  been  prey- 
ing upon  all  classes  and  all  parts  of  the  State,  and  to  which  it  is  bound 
to  succumb,  but  which  fortunately  is  not  known,  or  but  little  known,  in 
all  other  European  countries.'" 


197 


National    Monetary     Commission 

To  raise  a  profession  to  a  ministerial  office  is  not  to 
modernize  it.  But  the  provisions  of  1823,  1862,  and  1885 
were  different. 

(82)  A  royal  ordinance  of  November  12,  1823,  author- 
ized    the    stockbrokers    to    quote    foreign    government 
securities. 

(83)  A  law  of  July  2,    1862,  authorized   stockbrokers 
doing  business  on  "bourses  with  parquets"  to  take  capi- 
talists into  partnership  (bailleurs  des  fonds),  that  is  to  say, 
silent  partners  (commanditaires) . 

A  law  of  March  28,  1885,  recognized  as  legal  all  trans- 
actions for  future  delivery  (marches  a  terme) — even  those 
which  are  settled  by  paying  the  difference — and  removed 
those  special  obligations  imposed  upon  stockbrokers  which 
were  of  a  nature  rendering  such  operations  impossible. 

Finally,  a  law  of  April  14,  1898,  was  the  crowning 
point  of  what  was  improperly  called  the  reorganization 
of  the  financial  market. 

Concerning  the  law  of  1885  and  the  law  of  1898,  it  is 
necessary  to  make  a  special  study  of  the  conditions  which 
led  to  their  formation. 

The  first  law  has  an  economical  importance  reaching 
beyond  the  realm  of  the  Bourse.  All  transactions  for 
future  delivery  are  recognized  as  legal. 

The  second  is  specifically  intended  for  the  financial 
market. 

(84)  The  law  on  time-bargains  (marches  a  terme)  is  very 
important  from  an  economic  standpoint.     Not  only  does 
it  indicate  a  social  progress,  in  that  it  removed  the  mon- 
strous immorality  which  was  formerly  widespread,  and 
which  consisted  in  permitting  speculators  to  decline  to  pay 


198 


History   and   Methods   of  the   Paris    Bourse 

their  differences  by  presenting  the  plea  of  gambling,  but  it 
indicates,  besides,  a  philosophical  progress — a  progress  in 
the  general  trend  of  thought.  The  time-bargain  is  not 
simply  a  contract  the  settlement  of  which  is  postponed  to 
a  certain  date,  one  which  works  itself  out  hi  time  and 
space;  it  is  a  contract  upon  generalized  merchandise. 

We  know  that  Bourse  operations,  whether  they  apply 
to  merchandise  or  securities,  bear  upon  things  in  genere 
which  can  be  replaced  by  each  other — one  being  as  good 
as  the  others,  and  reciprocally.  To  be  sure,  it  is  easy, 
even  very  easy,  to  conceive  of  a  trade  bearing  upon  a 
specific  object,  since  it  is  always  so  in  retail  trading: 
Goods  against  money,  money  against  goods,  be  it  for 
cash  or  on  credit.  Peter  sells  to  Paul  this  or  that  object, 
payable  immediately,  or  Peter  sells  to  Paul  this  or  that 
object,  for  100  francs  payable  in  three  months;  it  is 
a  time-bargain  (marche  a  terme)  bearing  upon  a  specific 
object. 

But  the  vast  majority  of  time-bargains  of  commerce 
bear  upon  things  fungible  (interchangeable) — things  in  a 
generalized  and  not  in  a  specialized  sense. 

A  speculator  calls  upon  a  commission  merchant;  he 
buys  from  him  100  casks  of  alcohol  and  100  bags  of  sugar. 
Those  100  casks  of  alcohol  and  those  100  bags  of  sugar 
are  not  in  the  hands  of  the  commission  merchant.  This 
merchandise,  these  quantities  which  the  commission 
merchant  sells,  are  not  necessarily  in  his  stores.  The 
contract  calls  for  merchandise  of  a  certain  type,  which 
the  seller  shall  deliver  on  the  date  fixed. 

Well,  if  it  is  a  question  of  alcohol,  sugar,  wheat,  flour, 
wool,  or  copper,  on  the  commercial  bourse,  it  is  under- 


199 


National     Monetary     Commission 

stood  that  the  goods  will  always  be  of  a  current  type, 
applicable  to  all  contracts. 

The  same  applies  to  securities." 

In  this  way,  all  securities  are  made  fungible  (equivalent, 
interchangeable).  On  that  principle,  Peter  goes  to  Paul, 
the  banker,  and  purchases  from  him  25  shares  Credit  Fon- 
der for  the  end  of  the  month.  It  may  happen  that  the 
transaction  is  specific,  but  in  most  cases  he  does  not  buy 
25  shares,  numbered  i  to  25  or  25  to  50  or  50  to  75.  He 
purchases  25  shares,  no  matter  which,  provided  they  be 
shares  of  the  Credit  Fancier.  This  condition  is  the  regular 
one  on  the  Bourse. 

It  is  this  fundamental  condition,  necessary,  we  may 
say,  for  transactions  for  future  delivery,  which  leads  cer- 
tain people  to  conclude  that  they  are  non-existent  and 
fictitious.  Where  was  the  merchandise  at  the  time  of  sale  ? 
Where  were  the  securities  at  the  time  of  contract?  They 
are  not  found,  and  thereupon  is  based  the  non-existence 
and  fictitiousness  of  contracts.  But  this  merchandise  is 
not  found,  because  it  can  not  be  found;  because,  we  repeat, 
the  contracts  have  aimed  at  things  in  genere,  and  because 
the  nature  of  the  operations  is  such  that  specification 
has  been  done  away  with  for  the  very  convenience  of  the 
transactions.  There  can  be  seen,  indeed,  where  lies  the 
error  of  those  who  deprecate  dealings  for  future  delivery. 
An  operation  bears  upon  things  assumed  as  equivalent 
and  fungible  (choses  fongibilisees) ,  and  people  exercise 
ingenuity  to  treat  it  like  a  transaction  bearing  upon 

a  It  is  by  application  of  that  principle  that  article  46  of  the  decree  of 
October  7,  1890,  states  that  "the  transactions  have  bearing  only  upon  cer- 
tain quantities,  without  any  specification  of  the  securities  negotiated  by  way 
of  indicating  their  numbers  or  otherwise." 


History   and   Methods    of  the   Paris    Bourse 

specific  objects.  It  is  not  surprising,  then,  that  when  one 
looks  into  a  contract  for  something  which  can  not  be 
found  in  it,  one  is  led  to  conclude  that  that  object  does 

not  exist,  and  that  the  contract  is  therefore  fictitious. 

f 

No  doubt,  before  1885,  the  validity  of  transactions  bear- 
ing on  fungibles  (choses  fongibles),  or  even  on  securities 
in  a  general  form,  was  recognized;  but  whenever  a  judge 
could  see  no  merchandise  moving,  whenever  there  were 
presented  to  him  only  accounts  of  differences,  a  psycho- 
logical process  took  place  in  his  mind  which  caused  him  to 
conclude  that  the  transaction  was  fictitious.  All  of  this 
rests  on  no  basis  of  reality,  he  thought.  And  if  one  of  the 
speculators  stood  up  for  that  argument,  which  was  freely 
current  elsewhere  in  popular  centers,  the  gambling  plea 
advanced  by  the  debtor  was  freely  accepted.  Article 
1965  of  the  Code  civil  states  that  the  law  grants  no  action 
for  a  gambling  debt.  Thus,  a  time  bargain  closing  with  a 
difference  was  considered  a  gambling  debt.  But,  since 
1885,  it  has  been  established  that  a  transaction  for  future 
delivery  (marche  a  terme)  is  legal,  and  if  the  operator  means 
to  gamble  he  must  bear  the  consequences  of  his  acts. 

(85)  For  a  long  time  financiers,  economists,  and  business 
men,  clamored  for  legal  recognition  of  dealings  for  future 
delivery,  and  even  of  speculative  bargains,  "short"  or 
"long"  of  stocks  (operations  a  decouvert),  or  of  such  that 
close  by  paying  the  difference. 

As  early  as  in  1801  Count  Mollien,  while  talking  with 
the  first  consul,  told  him:a  "  It  is  true,  General,  that  these 
transactions  (marches  a  terme)  were  proscribed  before  the 
Revolution  by  a  council's  decision;  but  when  it  is  seen 

aMemoires  d'un  Ministre  du  Tresor  Public,  T.  I,  pp.  251  to  273. 

201 


National    Monetary     Commission 

that  they  have  never  been  more  numerous  than  since  that 
time,  we  might  ask  ourselves  whether  it  is  the  law  or  the 
dealings  for  future  delivery  (marches  a  terme)  which  are 
to  be  found  fault  with.  When  we  then  consider  the 
course  of  all  civil  transactions,  we  see  everything  resolved 
into  transactions  for  future  delivery ;  through  them  towns 
are  supplied,  armies  are  maintained;  on  them  are  based  all 
great  commercial  combinations ;  we  praise  the  cleverness  of 
the  merchant  who  purchases  provisions  for  a  sum  tenfold 
his  capital,  because  he  has  so  well  gauged  the  requirements 
.of  consumption  that  the  sale  of  his  goods  is  assured  him 
before  reaching  the  maturity  fixed  for  the  payment. 

"  Why  should  not  that  principle,  which  is  held  in  esteem 
in  all  European  centers,  be  recognized  in  that  place  called 
the  Bourse?  Will  anyone  object  that  on  the  Bourse  trans- 
actions for  future  delivery  are  not  always  bona  fide? 
Should  we  then  give  up  bills  of  exchange  because  dishonest 
merchants  make  ill  use  of  them? 

"  If  abuses  have  been  introduced  into  Bourse  trans- 
actions, the  blame  should  be  laid  on  the  administration 
of  justice,  which  places  these  transactions  beyond  the 
reach  of  the  law;  if  they  break  public  faith,  the  less  should 
the  courts  refuse  to  take  cognizance  of  this  fact.  Their 
duty  is  to  search  for  and  punish  that  breach. 

"  When  a  free  man  has  involved  himself  in  reckless 
engagements,  it  is  in  their  fulfillment  that  he  must  find 
the  penalty  for  his  folly  and  his  bad  faith;  the  efficacy 
of  the  penalty  is  to  be  found  in  the  warning  it  leaves; 
and,  surely,  to  declare  the  object  of  the  offense  void  for 
the  benefit  of  the  more  guilty  person,  was  not  a  salutary 
warning  given  by  the  jurisprudence  of  1786? 


202 


History   and   Methods   of  the   Paris   Bourse 

"  Bourse  transactions  have  a  peculiar  character,  in  that 
the  two  contracting  parties,  unknown  to  one  another, 
bind  themselves,,  through  the  mediation  of  a  stock- 
broker, who  is  the  representative  of  the  law  (I'homme  de  la 
loi) ;  he  is  responsible  before  the  law  for  all  his  actions ; 
therefore,  the  law  should  not  decline  to  pass  upon  any  of 
these  actions. 

"The  common  objections  to  bourse  contracts  are: 
One  can  not  sell  that  wrhich  one  does  not  own,  and  the 
law  can  not  recognize  a  bargain  which  should  never 
have  been  made.  In  the  main,  these  objections  are 
merely  begging  the  question;  it  seems  to  me  that  the  law 
should  not  protect  that  which  it  can  not  punish;  it  should 
not  prohibit  in  Paris  a  mode  of  dealing  sanctioned  through 
long  practice  in  London  and  Amsterdam. 

"I  do  not  claim  that  time-bargains  (marches  h  terme) 
are  free  from  abuses,  but  I  demand  that,  in  order  to 
repress  these  abuses,  the  contracting  parties  be  judged 
according  to  common  law  on  contracts." 

The  transactions  for  the  account  on  the  Bourse  were, 
nevertheless,  if  not  prohibited,  at  least  made  imprac- 
ticable, through  the  texts  of  the  old  ordinances  on  the 
Bourse — the  Council  decisions  of  1774,  1785,  and  1788. 
The  decree  of  27  Prairial,  year  X,  exacted  that  the  stock- 
broker should  have  on  hand  the  securities  to  be  disposed 
of  and  the  funds  necessary  for  purchases.  No  doubt,  to 
meet  the  requirements  of  the  times,  transactions  for  the 
account  were  considered  as  allowable,  provided  they  were 
made  in  good  earnest.  At  any  rate,  if  they  were  not 
made  good  by  depositing  the  securities  or  the  cash,  they 
were  illegal. 


National    Monetary     Commission 

It  was  thus  that  the  stockbrokers  understood  the  decree 
of  the  27  Prairial,  year  X,  on  day  following  the  publi- 
cation. Indeed,  on  the  loth  Fructidor,  year  X,  they  met 
and  decided  that  they  should  deliver  securities  to  one 
another  on  the  day  following  the  contract. 

(86)  The  Code  de  commerce  added  nothing  to  the  provi- 
sions of  the  organic  law  of  the  Bourse,  but  it  brought  in 
preciseness.  From  the  draft  of  the  code,  it  followed  that 
the  ''short"  sales  and  "long"  purchases  (marches  a  terme 
a  decouvert — literally,  "uncovered"  time-bargains) — that 
is  to  say,  the  real  time-bargains,  implying  credit  as 
regards  both  merchandise  and  money — were  prohibited  to 
stockbrokers.  Private  individuals  were  permitted  to  deal 
in  them.  No  doubt,  so  far  as  they  were  concerned,  it 
might  be  gambling  or  not,  according  to  circumstances; 
but  no  text  prohibited  any  person  from  binding  himself 
toward  another  to  deliver  securities  at  a  given  time.  It 
was  only  by  a  special  provision,  that  the  stockbroker  could 
not  undertake  to  be  responsible  for  the  operations  in  which 
he  acted  as  intermediary.  Such  was  the  provision  of  arti- 
cle 86  of  the  Code  de  commerce,  so  that  if  he  acted  as  inter- 
mediary in  a  transaction  for  future  delivery,  he  violated 
article  86  and  ran  the  risk  of  a  fine  and  removal. 
(Art.  87.) 

The  report  on  Title  V  of  the  Code  de  commerce  of  1807 
is  explicit  on  that  point.  The  reporter,  Jard  Panvillier, 
expressed  himself  as  follows,  when  speaking  of  the  "agents 
de  change:" 

"  Moreover,  the  law  honors  their  profession,  in  declaring 
that  it  can  not  be  exercised  by  a  man  who  has  failed,  unless 
he  has  been  rehabilitated;  and,  with  a  special  foresight 


204 


History    and   Methods   of  the   Paris   Bourse 

in  their  behalf,  it  safeguards  them  against  the  possibility 
of  exposing  themselves  to  a  case  of  exclusion  on  that 
account,  by  forbidding  them,  under  penalty  of  irrevoca- 
ble removal,  to  transact  commercial  or  banking  opera- 
tions for  their  own  account  and  to  render  themselves 
liable  for  the  carrying  out  of  transactions  in  which  they 
act  as  brokers. 

"The  kind  of  perfect  confidence  which  must  be  granted 
them  by  those  who  avail  themselves  of  their  services, 
renders  this  measure  necessary.  They  must  not  be 
allowed  to  expose  themselves  to  the  danger  of  compro- 
mising the  interests  of  -their  clients,  by  compromising 
their  own  fortune  in  a  risky  or  unfortunate  enterprise. 

"  This  is  what  the  law  wanted  to  guard  against  through 
a  provision  which  some  of  them  may  find  too  severe,  but 
which  will  meet  with  the  approval  of  all  those  who  are 
wise  and  act  in  good  faith;  this  provision  is  more  than 
ever  necessary  nowadays,  when  gambling  in  public  secur- 
ities has  become  a  mania,  causing  the  ruin  of  a  large 
number  of  individuals,  without  any  advantage  to  the 
Government  or  to  the  owners  of  state  rentes  who  consider 
them  in  the  light  of  real  property  and  property  to  be  held. 

"The  guaranty  which  some  stockbrokers,  enticed  by  a 
more  or  less  heavy  rate  of  commission,  do  not  hesitate 
to  give  for  a  trade  in  effects  that  neither  buyer  nor  seller 
possesses,  and  that  often  the  tenfold  of  their  actual  pos- 
sessions could  hardly  realize — this  guaranty  compromises 
not  only  their  own  fortunes  and  personal  honor,  but  also 
the  reputation  of  their  association,  which  the  honest  men 
composing  it  are  interested  in  preserving  unblemished. 
Let  us  hope  that  the  fear  of  being  prosecuted  as  bank- 


205 


National    Monetary     Commission 

rupts,  in  case  of  failure,  will  deter  those  whom  their  own 
self-interest  properly  understood  has  not  been  able  so  far 
to  restrain  from  entering  into  such  risky  engagements; 
and  let  us  hope,  also,  that  for  want  of  finding  solvent 
guarantors,  the  foolhardy  or  inconsistent  men  who  have 
drawn  from  the  English  the  baneful  mania  of  what  is 
commonly  known  as  'agiotage'  (stockjobbing),  will  forego 
that  dangerous  game,  in  order  to  apply  themselves  to  more 
respectable  and  more  useful  occupations." 

Thus  the  stockbroker,  practically,  can  not  act  as  inter- 
mediary in  transactions  for  future  delivery.  Individuals 
wishing  to  deal  for  their  own  account,  as  the  English  do  (as 
stated  by  Jard  Panvillier) ,  are  free  to  do  so.  In  any  case, 
they  will  not  find  any  stockbrokers  to  guarantee  their 
operations. 

We  have  seen  that  under  the  First  Empire  and  up  to  the 
time  of  the  Restoration  the  French  financial  market  was 
weak;  public  loans  were  granted  to  London  and  Amster- 
dam houses.  At  that  time  it  was  necessity  which  drove 
the  stockbrokers  to  transact  bargains  for  the  account. 
Speculators  dispensed  with  them.  It  was  therefore  a 
question  of  either  violating  the  regulations,  or  observing 
them  and,  thus,  condemning  oneself  to  being  wiped  out 
in  short  order. 

(87)  A  famous  lawsuit,  the  case  of  "agent  de  change" 
Perdonnet  against  M.  Forbin  Janson,  reminded  the  stock- 
brokers of  the  severity  of  the  regulations  they  violated. 
The  Cour  de  Paris  and  the  Cour  de  cassation  (August 
n,  1824)  declared  in  force  the  old  decisions  of  the  Coun- 
cil under  the  old  royalty,  and  the  decree  of  the  27  Prai- 
rial,  year  X,  and  decided  that  the  plea  of  gambling  was 


206 


History   and   Methods   of  the   Paris   Bourse 

opposable  to  intermediaries  who  undertake  bargains  for 
the  account  in  public  securities,  without  previously  exact- 
ing the  deposit  of  the  securities  or  of  the  funds  required 
for  the  payment. 

The  higher  Parisian  commerce  was  stirred  up.  It  drew 
up  a  "  Par  ere"  (memorial  of  merchants  on  matters  of 
commerce)  which  we  reprint  from  M.  Alfred  Naquet's 
report,  in  1885,  on  the  draft  of  the  bill,  now  law,  on  deal- 
ings for  future  delivery :  a 

"  Parkre"  OF  1824. 

"  We,  the  undersigned  bankers,  merchants,  tradesmen, 
and  capitalists,  certify: 

"  i.  The  form  of  contract  stated  below  6  is  the  only 
one  in  use  for  transactions  made  on  the  Bourse  under 
the  designation  of  fixed  transactions  (marches  fermes)  or 
operations  for  future  delivery  (marches  a  terme). 

"2.  That  in  all  these  operations,  without  excepting  any, 
it  is  only  the  seller  that  grants  time  to  the  purchaser,  and 
that  the  latter  may  exact  delivery  of  the  securities  pur- 
chased at  his  first  requisition. 

"  3.  That  the  operations  in  question  are  settled  through 
the  delivery  of  the  securities  sold,  whether  they  are  in 

aChambre  des  D&put&s.  Documents  parlementaires,  session  1882,  No. 
1196. 

&  This  is  the  form  referred  to : 

"Bought  (or  sold)  of  Mr. (number  of  certificates)  with 

accrued  interest,  deliverable  on  liquidation  of  (maturity) ,  or  sooner,  at  the 
discretion  of  the  purchaser,  against  payment  of  the  sum  of . 

' '  Issued  in  Paris,  in  duplicate,  the (date) . 

"  (Signature) " 

The  words  "sooner,  at  the  discretion  of  the  purchaser"  (plutdt  d  la 
volonti  d'acheteur)  show  the  discount  privilege  (jacult6  d'escompte)  granted 
to  the  purchaser. 

i 14  207 


National     M  o  n  et  ar y     Commission 

the  hands  of  the  seller  at  the  moment  the  purchaser  de- 
mands delivery,  or  the  seller  causes  them  to  be  purchased 
in  order  to  effect  the  delivery. 

"4.  That  in  all  cases,  there  is  always,  on  one  side,  the 
purchase  of  an  object  which  must  be  paid  for,  and  on  the 
other  side,  the  sale  of  an  object  which  must  be  delivered; 
therefore,  it  is  not  permissible  to  regard  these  kinds  of 
operations  as  betting  on  the  quotations  of  public  securities. 

"5.  That  dealings  for  future  delivery,  called  'marches 
fermes'  (fixed  transactions) ,  as  they  are  practised  nowadays 
on  the  Paris  Bourse — that  is  to  say,  restricted  to  a  period 
of  sixty  days,  and  subject  to  the  condition  that  delivery  is 
expected  when  exacted  by  the  purchaser — are  advan- 
tageous both  to  the  Government  and  to  commerce;  to 
the  Government,  because  the  State  could  not  carry  out 
the  transactions  in  rentes  made  necessary  by  the  finan- 
cial system  now  sanctioned,  without  the  assistance  fur- 
nished by  these  forms  of  trade,  and  yet  the  financial  sys- 
tem based  on  credit,  is  one  of  the  principal  conditions  of 
the  strength  and  power  of  modern  government ;  to  com- 
merce, because  these  transactions  present  to  holders  of 
rentes  a  sure,  expeditious,  and  cheap  method  of  obtain- 
ing, whenever  they  wish,  the  funds  they  need,  by  giving 
as  guaranty  these  selfsame  rentes;  that,  on  the  other 
hand,  capitalists  find  in  these  transactions  the  means  to 
place  their  funds  for  as  short  a  time  as  they  choose,  and 
with  the  certainty  of  being  able  to  call  them  in  at  will. 
Thus,  on  the  one  hand,  rentes  become  a  real  representative 
sign,  increasing  the  bulk  of  capital,  and,  on  the  other 
hand,  all  the  idle  funds  find  employment  for  as  long 


208 


History   and    Methods   of  the   Paris   Bourse 

or  as  short  a  period  as  is  suitable  to  the  owners.  This 
increase  in  the  number  of  representative  signs  and  in  the 
bulk  of  circulating  funds  necessarily  tends  to  reduce  their 
price — that  is  to  say,  the  interest — and  thereby  renders 
to  commerce  the  most  useful  of  all  sendees. 

' '  For  this  reason  the  undersigned  hold  that  the  trans- 
actions in  question  are  indispensable  in  the  present  situa- 
tion of  France,  and  that  the  jurisprudence  adopted  by 
the  King's  court  (which  rests  on  ancient  Council  deci- 
sions, given  at  a  time  and  under  circumstances  that 
can  in  no  way  be  compared  to  those  prevailing  in  our 
times)  is  in  opposition  to  the  true  political  and  commer- 
cial interests  of  our  country. 

"  (Signed) 

"J.  IVAFFITTE.  ARDOIN-HUBBARD. 

"MAU.ET  FR£RES.  OPPERMANN. 

"  ROUGEMONT  DE  LOWEMBERG.       MANDROT. 

"PihuER  FR^RES.  THURET. 

"  Piw,ET-ViUv.  JONAS  HAGERMANN. 

"GUISRIN  DE  FRONCIN.  ANDR£  COTTIER. 

"  L.  DURAND.  A.  VASSAL. 

"J.  LEFEVRE.  A.  ODIER. 

"  DECHAPEAUROUGE.  J.  A.  BLANC-COLUN. 

"CissAR  DE  LAPANOUZE.  G.  CACCIA. 

"GOULARD.  GABRIEL  ODIER. 

"  J.  F.  CHEVALS.  J.  LABAT." 

(88)  The  administration  of  justice  persisted  in  the 
same  direction  for  nine  years;  but  when  it  exhibited  some 
tendency  toward  more  liberality,  M.  Ilarle*,  in  the 
Chamber  of  Deputies,  asked  the  "July  Government" 


209 


National    Monetary     Commission 

for  measures  to  repress  speculation.  Gamier  Pages 
answered  him  (session  of  January  23,  1833): 

"  If  you  admit,  together  with  M.  Harle,  that  the  seller  for 
future  delivery  must  deposit  in  advance  his  certificate  of 
rentes,  you  would  often  render  actual  operations  impos- 
sible; this  is  true  of  rentes,  as  of  all  other  merchandise. 

"One  instance  will  permit  you  to  grasp  more  easily 
what  I  have  in  mind.  I  will  suppose  that  Antwerp, 
Amsterdam,  or  London  quotes  the  rente  at  a  higher  price 
than  Paris — a  thing  which  happens  everyday;  well  then, 
if  a  banker  has  given  an  order  to  purchase  in  London, 
in  Amsterdam,  or  Antwerp,  and  is  in  the  meantime  un- 
able either  to  deposit  the  rente  which  he  has  not  yet 
received,  or  even  to  indicate  its  number,  by  what  right 
would  you  prevent  him  from  selling  that  rente,  for 
delivery  as  soon  as  it  will  arrive?" 

To  prevent  him  from  effecting  that  operation,  would  be 
forcing  him  to  gamble,  since  you  would  make  him  run 
the  chances  of  a  rise  or  fall  which  may  occur  between  the 
time  of  purchase  at  the  foreign  exchange,  and  the  moment 
the  security  will  reach  his  hands. 

The  Harle  proposition  was  rejected. 

(89)  On  July  12,  1842,  MM.  Bagnenault,  Hottinguer, 
De  Rothschild,  Fould,  Ch.  Laffitte,  Larien,  and  Lavareille 
addressed  the  following  memorial  (parere)  to  the  Gov- 
ernment : 

"We,  the  undersigned  bankers  and  capitalists,  after 
having  taken  cognizance  of  the  declaration  made  in  1824 
by  the  principal  houses  in  Paris,  are  eager  to  confirm 
it  in  the  most  explicit  manner,  believing  it  our  duty  to 
call  the  attention  of  the  Minister  to  the  difficulty,  nay, 


210 


History   and   Methods   of  the   Paris   Bourse 

the  insurmountable  obstacles,  which  the  great  financial 
operations  connected  with  public  credit  would  experience 
if  this  method  of  dealing,  sanctioned  by  custom  and  the 
requirements  of  the  market,  should  be  interfered  with." 

(90)  In  1867  the   Imperial   Government   appointed  a 
commission   to    inquire    into   the   question  of   time-bar- 
gains.    M.  Iy.  Chevallier,  a  member  of  the  commission 
of  1867,  made  a  remarkable  report  on  the  subject,  con- 
cluding in  favor  of  the  necessity  that  the  law  recognize 
dealings  for  future  delivery. 

(91)  After  the  disaster  of  the    "  Union   Generate,"    in 
1882,  the  scandal  was  enormous;  the  Bourse  had  pre- 
sented a  frightful  spectacle.     The  stockbrokers  had  com- 
pletely violated  the  regulations  of  their  profession.     But 
it  must  be  said  in  their  defense,  that,  since  the  begin- 
ning of  the  century,  they  had  been  obliged  to  violate  them, 
and    that    the    different  administrations,  by  overlooking 
their  actions,  while  the   merchandise  brokers   had  been 
placed  under  the  direction  of  the  Minister  of  Finance, 
were  partly  responsible  for  the  fact  that  certain  regula- 
tions had  not  been  followed.     However,  if  the  saying  "  est 
modus  in  rebus  "  (there  is  a  mean  in  all  things)  is  kept 
in  mind,  it  becomes  certain  that  in  granting  credits  to 
clients,  the    stockbrokers    lacked  judgment.     The    spec- 
tacle presented  by  this  very  clientage  was  not  less  scan- 
dalous.    Many  persons  occupying  a  certain  social  standing 
did  not  hesitate  to  refuse  to  meet  their  obligations. 

The  administration  of  justice  which  admitted  the  plea  of 
gambling  as  regards  time-bargains  settled  by  a  difference, 
permitted  them  to  take  that  stand. 

Public  opinion  was  aroused. 


211 


National    Monetary     Commission 

On  February  8,  1882,  the  Paris  Chamber  of  Commerce 
passed  a  resolution  calling  on  the  Government  for  a  modi- 
fication of  the  existing  laws,  M.  Gustave  Roy  preparing 
the  report. 

In  concluding,  that  report  expressed  itself  as  follows: 

"An  administration  of  justice  which  would  permit  a 
speculator  to  carry  on  two  deals  of  equal  importance  with 
two  different  brokers,  one  for  a  rise  and  the  other  for  a 
fall,  and,  while  collecting  from  one  the  profit  he  had 
made,  to  advance  the  plea  of  gambling  toward  the  other, 
in  order  to  avoid  paying  the  loss  which  the  operation 
showed — such  an  administration,  I  say,  could  not  hold 
any  longer;  that  fact  alone  would  condemn  it. 

"  Experience  shows  that  the  plea  of  gambling  has  never 
protected  anybody  but  those  of  bad  faith,  and  has  only 
encouraged  the  excess  of  speculation,  as  was  stated  by 
M.  Andrieux  in  his  report  presented  to  the  Chamber  in 
1877,  in  the  name  of  the  seventh  Commission  of  Initiative. 

"  Prompted  by  these  reasons,  and  considering  that  the 
present  legislation,  far  from  preventing  gambling,  encour- 
ages it;  considering  that  bad  faith  finds  protection  in 
the  jurisprudence  sanctioned;  and  further  considering 
that  in  commercial  affairs,  as  in  any  other,  it  behooves 
to  allow  every  one  his  full  freedom,  as  well  as  to  hold  him 
responsible  for  his  actions — I  beg  to  suggest  that  an 
address  be  sent  to  the  Minister  of  Commerce,  confirming 
the  letter  of  the  Chamber  of  Commerce  of  November  25, 
1877,  and  requesting  the  Government  to  introduce  a  bill 
in  the  Chambers,  declaring  that  article  1965  of  the  Code 
civil  does  not  apply  to  debts  resulting  from  dealings  for 


212 


History    and   Methods   of  the   Paris   Bourse 

future  delivery,  and  that  articles  421  and  422  of  the  Code 
penal  are  repealed. 

(92)  In  the  Chamber  of  Deputies  two  members,  MM. 
Alfred  Naquet  and  Lagrange,  introduced  a  joint  proposi- 
tion tending  to  recognize  dealings   on  the  "long"  and 
"short"  accounts  (operations  a  decouvert)  as  legal.     The 
Government,  on  its  part,  appointed  a  special  commission 
to   study   the   question.     It   was    composed    of    MM.  J. 
Bozerian,    senator,    chairman;    Charles    Ferry,    deputy; 
Clamegeran,  councillor  of  state;  Monod,  councillor  at  the 
Cour   de   cassation;  I/aew,  public  prosecutor  at  the  Tri- 
bunal de  la  Seine;  Gay,  director-general  of   government 
funds;  Pallain,  director  of  audits  in  the  finance  depart- 
ment;   Girard,   director    of     interior    commerce;    Gonse, 
chief   of  the   division  of   civil   matters   in   the  ministry 
of  justice;    Lyon-Caen,  professor   at    the  Toulouse  fac- 
ulty; Vavasseur,  barrister  at  the  Cour  d'appel  at  Paris; 
Baudelot,  former  president  of  the  Tribunal  de  commerce 
of  Paris;  Moreau,  syndic  of    the  stockbrokers  of  Paris; 
Ivecomte,  stockbroker;   Alphonse   Mallet,    regent   of   the 
Banque    de    France;   Girod,    manager    of   the    Comptoir 
d'Escompte;  and  Durrieu,  manager  of  the  Credit  Industriel 
et  Commercial. 

This  special  commission  appointed  as  its  reporter  Pro- 
fessor Lyon-Caen  (to-day  Dean  of  the  faculty  of  law  of 
Paris),  and  it  was  the  elaborate  work  of  this  eminent 
reporter  which  was  used  as  an  explanatory  statement  for 
the  bill  presented  by  the  Government. 

(93)  The   reporter    in    the    Chamber  was    M.   Alfred 
Naquet.     When    the  bill  was  voted  upon,  M.  Naquet, 
who  in  the  meantime  had  become  a  senator,  was  intrusted 


213 


National    Monetary     Commission 

with  the  preparation  of  the  report  before  the  higher 
legislative  assembly.  After  being  argued  in  the  Senate, 
the  bill,  slightly  amended,  was  returned  to  the  Chamber, 
and  the  report  was  then  made  by  M.  Peulevey. 

The  law  on  dealings  for  future  delivery  (marches  a  terme) 
was  promulgated  on  April  8,  1885.  Having  been  finally 
voted  upon  on  March  28,  it  is  generally  known  as  the  law 
of  March  28,  1885.  Dealings  for  future  delivery  are  recog- 
nized as  legal.  They  were  legal  before ;  on  that  point  the 
law  aimed  only  to  do  away  with  the  surrounding  uncer- 
tainties, which  resulted  from  the  special  regulations  made 
for  stockbrokers.  Thus,  in  the  terms  of  that  law,  no  one 
can,  in  regard  to  operations  for  future  delivery,  plead 
article  1965  of  the  Code  civil,  according  to  which  the  law 
grants  no  recourse  to  a  party  for  the  payment  of  a  gam- 
bling debt  or  a  bet.  Article  1965  of  the  Code  civil  is  not 
repealed,  but  it  can  not  be  applied  to  transactions  clos- 
ing by  a  difference. 

It  should  be  noted,  however — as  a  result  obtained  from  a 
discussion  within  the  senate  commission  a — that  if  the  con- 
tracting parties  have  in  advance  made  a  written  contract, 
agreeing  that  they  would  not  exact  delivery,  they  will 
not  enjoy  the  provisions  of  the  law. 

Finally,  the  law  repeals  the  former  provisions  which 
make  it  obligatory  for  the  stockbroker  to  have  on  hand 
the  securities  for  sale,  as  well  as  the  cash  for  purchase,  and 
forbid  him  to  hold  himself  guarantor  for  transactions  in 
which  he  acts  as  intermediary. 

Let  us  note,  in  conclusion,  that  the  law  of  1885  has  a 
wide  range.  It  applies  to  operations  in  merchandise  and 

aSenat.     Documents  parlementaires,  1884,  No.  161,  p.  12. 
214 


History   and   Methods   of  the   Paris   Bourse 

in  securities  negotiated  through  intermediaries  other  than 
stockbrokers. 

As  to  securities  negotiated  through  stockbrokers,  they 
could  always  be  sold  direct  for  cash  by  private  individuals. 
They  could  likewise  be  sold  direct  for  future  delivery,  but 
operations  settled  by  differences  were  subject  to  being 
barred  as  gambling.  Since  the  law  of  1885,  this  last  plea 
can  no  longer  be  brought  in,  but  the  privilege  of  the  stock- 
brokers is  still  invoked  for  these  operations.  According 
to  a  legal  argument,  which  is  very  disputable  (Cour  de 
cassation,  March  23,  1893,  Sirey,  1893,  1.240),  trans- 
actions for  future  delivery,  closed  by  differences,  can  not 
be  made  the  objects  of  direct  operations.  This  solution  is 
against  the  express  wish  of  the  lawmaker.  The  direct 
transaction,  even  when  made  for  future  delivery,  and 
closed  by  a  difference,  was  permissible  before  1885.  It 
should  derive  benefit  from  the  law  of  1885.  To  forbid  it 
through  indirect  ways  is  to  antagonize  not  only  the  wish 
of  the  lawmaker  of  1885,  but  also  the  wish  of  the  law- 
maker of  Ventose,  year  IX. a 

(94)  Having  inquired  into  the  law  on  transactions  for 
future  delivery,  we  shall  proceed  to  look  into  the  state  of 
things  since  1898. 

In  1893  a  tax  on  Bourse  operations  was  established. 
At  that  moment  occurred  a  particularly  acute  phase  of  the 
many  centuries  old  struggle  between  the  stockbrokers 
(agents  de  change)  and  the  curb  brokers  (coulissiers) . 

This  occurrence  led  to  what  has  been  very  improperly 
called  the  "  Reorganization  of  the  financial  market  of 
1898."  It  is  important,  therefore,  to  recite  summarily 

»See  note  of  M.  Lyon-Caen.     Sirey,  1893,  p.  240. 
215 


National    Monetary     Commission 

the  history  of  the  struggle  of  the  stockbrokers  of  the  "  Par- 
quet" against  the  curb  brokers  of  the  "Coulisse." 

The  "  coulissiers"  were  men  who  illegally  served  as 
intermediaries  in  the  public  market. 

According  to  M.  Fremery,a  the  words  "coulisse"  and 
" coulissiers"  originated  from  the  fact  that,  in  the  old 
premises  devoted  to  the  Paris  Bourse,  the  parties  operating 
without  the  services  of  the  "agents  de  change"  met  in  a 
separate  passageway  or  hallway  (couloir)  separated  by  a 
breast-high  partition  from  the  place  where  the  dealers 
assembled.  That  passageway  was  called  "La  Coulisse" 
(the  Coulisse). 

But  if  that  name  has  not  been  very  long  in  use,  the 
institution — though  we  can  hardly  give  such  a  name  to  a 
gathering  so  unorganized,  and,  we  may  say,  formless — 
is  very  old. 

The  brokers,  or  money  changers,  who  did  business  at 
the  fairs  in  the  middle  ages,  are  the  predecessors  alike 
of  the  merchandise  brokers,  of  the  stockbrokers,  and  of 
the  curb  brokers. 

But  an  ordinance  of  Philip  the  Fair,  in  February,  1304, 
directed,  as  we  saw,  that  the  "Change  de  Paris"  (the 
exchange  traffic  of  Paris)  shall  be  held  on  the  Grand  Pont 
(the  great  bridge  on  the  Seine) ;  it  was  forbidden  to  do  it 
elsewhere.  Sundry  royal  edicts,  in  1305,  direct  that  no 
one  " shall  dare  traffic  in  exchange"  (" oser  tenir  change ") 
if  he  has  not  obtained  "royal  assent  and  permission" 
("  as  sentiment  et  conge  royal").  It  appears,  therefore, 
that  those  who  in  Paris  engaged  in  money-changing  else- 
where than  on  the  Grand  Pont,  and  outside  of  Paris 

o  Des  operations  de  Bourse,  p.  494. 
216 


History   and   Methods   of  the   Paris   Bourse 

elsewhere  than  at  the  "tables"  (royal  exchange  premises), 
"without  assent  or  permission"  (and  some  such  there 
surely  were),  were  the  first  "  coulissiers." 

At  all  times,  whenever  there  have  been  privileges,  some 
men  have  been  found  to  oppose  them.  Of  course,  these 
men  are  not  theorists,  or  pedants;  they  are  simply  men 
whom  this  or  that  privilege  prevents  from  working  freely, 
and  who  represent  the  manifestation  of  that  mysterious 
force  of  things  which  tends  toward  freedom  of  trade. 
Commercial  law  owes  its  birth  only  to  these  protestations 
of  practical  men  in  apparent  revolt  against  the  laws,  which 
become  the  unconscious  shapers  of  future  legislation. 
From  the  day  when  there  was  an  "agent  de  change"  there 
was  a  "coulissier"  The  first  called  the  second  a  thief, 
because  he  encroached  upon  his  privilege.  The  second 
hurled  back  the  compliment,  because  the  privilege  robbed 
him  of  his  natural  right.  We  have  seen  numerous 
council  decisions  under  the  old  regime  forbidding  private 
individuals  the  unwarrantable  interference  with  the  func- 
tion of  stockbrokers.  That  it  was  repeatedly  forbidden 
is  proof  certain  that  the  offense  was  constantly  committed. 

(95)  Under  the  First  Empire,  the  curb  brokers  were 
already  organized;  there  were  conditions  for  their  admis- 
sion and  introduction.  The  authorities  closed  their  eyes. 
The  stockbrokers  complained,  and  requested  that  the 
unwarranted  interference  be  forthwith  referred  to  the 
courts.  This  request  was  denied  by  advice  of  the  Council 
of  State  of  May  17,  1809.  "It  must  be  acknowledged," 
said  the  learned  M.  A.  Buchere,  in  his  treatise  Opera- 
tions de  Bourse?  "that  some  of  them  (curb  brokers) 

°No.  33. 
217 


National    Monetary     Commission 

effected  their  transactions  in  the  most  honorable  way, 
and,  in  some  cases,  even  for  account  of  stockbrokers,  who 
considered  it  safe  to  intrust  them  with  certain  risky  or 
somewhat  irregular  operations." 

(96)  Under  the    Restoration,   speculation,   which  was 
considered  by  many  as  necessary  for  the  upholding  of 
public  credit,  greatly  expanded.     The  Coulisse  was  toler- 
ated— almost  encouraged.     In  1824,  M.  de  Villele  publicly 
refused  to  take  measures  against  the  Coulisse.0     In  1835, 
a  new  attempt  of  the  stockbrokers  was  followed  by  a 
complete  defeat.0     In  1842,  M.  Delessert,  prefect  of  police, 
sent  a  report  to  the  Minister  of  Finance,6  who,  in  pursu- 
ance of  a  complaint  of  the  stockbrokers,  had  instructed 
him    to    make   a  thorough  inquiry  into  the  methods  used 
by  the  Coulisse.     The  conclusion  of  the  report  was  that 
there  was  no  ground  for  prosecution,  as  the  stockbrokers 
themselves  were  guilty  of  the  same  practices  with  which 
they  reproached  the  curb  brokers. 

On  February  17,  1843,  the  stockbrokers,  in  order  to  have 
the  Coulisse  broken  up,  presented  a  voluminous  memorial 
to  the  Minister  of  Justice,  who,  however,  did  not  recognize 
their  request  as  justifiable. 

(97)  In  1859,  a  complaint  made  by  the  Syndical  Cham- 
ber succeeded  in  changing  the  state  of  affairs;  the  curb 
brokers  were  prosecuted,  found  guilty,  and  expelled  from 
the  Bourse  building. c 

Much  of  contemporary  evidence  establishes  the  fact 
that  this  measure  had  the  most  disastrous  effect  upon  the 

a  Eugene  Leon.     Etude  sur  la  coulisse  et  ses  operations,  p.  44. 
&  Alfred  Neymarck,  Le  Rentier,  March  17,  1898. 

c  Tribunal  correctionnel,  June  25,  1859;  Cour  de  Paris,  August  2,  1859; 
Cour  de  cassation,  January  19,  1860;  Dalloz,  1860,  1.40. 

218 


History   and   Methods   of  the   Paris    Bourse 

credit,  both  public  and  private;  the  "  Temps "a  borrows 
from  a  financial  publication  of  that  time  the  following 
statement : 

"The  stockbrokers,  who  hoped  that  the  suppression  of 
the  Coulisse  would  bring  back  business  to  the  Parquet, 
were  mistaken.  The  business  of  the  Coulisse  has  dis- 
appeared with  the  Coulisse  itself.  The  market  has 
been  hit  and  destroyed,  but  has  not  been  transferred. 
The  Government,  which  expected  that,  by  suppressing  the 
Coulisse,  it  would  raise  the  level  of  the  public  credit,  has 
not  realized  its  expectations." 

This  decline  was  testified  to  by  the  "Revue  des  deux 
Mondes,"b  in  an  article  from  the  pen  of  M.  Poujard'hieu, 
published  after  the  failure  of  the  Fould  conversion  scheme : 

"The  discussions  which  have  taken  place  in  the  legisla- 
ture," said  the  author,  "have  called  public  attention  to 
the  measures  which  the  Government  thought  proper  to 
resort  to,  in  order  to  foster  its  undertaking,  in  the 
face  of  the  impotence  resulting  from  the  practice  of 
monopoly.  It  is  safe  to  say,  that  all  the  means  employed 
have  only  succeeded  in  laboriously  hoisting  up  the  3  per 
cent  rentes  to  71  francs,  in  order  to  see  them  soon  again 
lagging  in  the  neighborhood  of  69  and  70.  And  yet  that 
painful  effort  caused  too  glaring  disasters  in  the  markets 
not  to  hurt  the  government's  undertaking." 

Further  the  author  calls  attention  to  the  fact  that  this 
fall  of  2  francs  in  a  restricted  market  has  had  worse  con- 
sequences than  a  fall  of  14  francs  in  1848,  or  a  fall  of  8 
francs  in  1859,  because,  the  risks  being  then  divided 

«  Bulletin  Financier  du  "Temps,"  February  i,  1897. 
&  June,  1862,  p.  740. 


219 


National     M on  et ar y     Commission 

amongst  a  greater  number  of  intermediaries,  the  market 
felt  more  secure  than  in  1862,  following  the  lawsuit  of 

1859- 
The  result  was  that  the  Coulisse  reappeared. 

(98)  On  November  4,  1861,  the  Minister  of  Finance,  M. 
Fould,  granted  to  the  Bourse  the  permission  to  suppress 
the  turnstiles,  and,  if  the  reestablishment  of  the  Coulisse 
can  not  be  attributed  directly  to  this  measure,  we  may 
yet  be  permitted  to  make  use  of  an  image  and  say  that 
the    curb  brokers  came    back   through  the    open  door. 
They  soon  formed  serried  ranks.     Nor  was  it  long  before 
affairs  became  enlivened.     Some  banks  had  been  founded 
about   this   time,  having  launched  some   securities.     In 
1855  the  six  great  railroad  companies  had  been  formed; 
in  1852    there   had  been  established   the   Credit  Fancier 
(national  mortgage  loan  society)  and  numerous  banking 
institutions. 

These  corporations  required  a  broad  market,  and  the 
market  widened  in  spite  of  the  narrow  sphere  prescribed 
to  it  by  law. 

In  1863,  the  Credit  Lyonnais  is  founded;  in  1864,  the 
Societe  Generate.  The  law  of  July  24,  1867,  concerning 
joint-stock  companies,  replaces  the  law  of  1856 — govern- 
ment authorization  for  limited-liability  companies  in 
shares  (societes  anonymes)  being  done  away  with.  A  new 
era  was  near  at  hand,  when  the  war  of  1870  broke  out. 

(99)  After  1870,  the   payment  of   the  war  indemnity, 
and  the  enormous  expenses  necessary  to  rehabilitate  the 
country  occasioned  great  credit  operations.     The  State, 
as  well   as   private   enterprises,  appealed  to  public  sav- 
ings.    Considerable    activity  reigned  on  the  Bourse,  as 


220 


History    and   Methods    of  the   Paris    Bourse 

everywhere  else.  M.  Thiers  never  ceased  to  congratulate 
himself  on  the  help  received  from  the  open  market  at 
the  time  of  the  emissions  upon  whose  success  depended 
the  liberation  of  French  territory. a 

aM.  Alfred  Neymarck,  in  the  course  of  a  discussion  at  a  meeting  of  the 
Societed'EconomiePolitique,  recalled  the  services  of  the  Coulisse;  he  showed 
that  M.  Thiers  and  M.Teisserencde  Bort,  interim  functionary  of  finance,  had 
applied  to  the  curb  brokers,  and  had  obtained  information  from  them  con- 
cerning the  condition  of  the  market.  "The  Coulisse,"  said  M.  Neymarck, 
" brought  subscriptions  to  our  loans  for  liberation;  it  kept  up  the  rente, 
whiclvissued  at  82. 50  and  84.50,  rose  to  119  and  120.  At  that  time,  stock- 
brokers, merchandise  brokers,  and  curb  brokers  all  rendered  services  not 
to  be  easily  forgotten."  (Sociitk  d'Economie  Politique,  Seance  du  5  awil, 
1893,  Journal  des  Economistes,  1893,  n.  p.  95.) 

In  that  regard,  let  us  also  mention  those  eloquent  lines  of  M.  Anatole 
Leroy-Beaulieu:  "The  confession  may  be  painful,  but  patriotism  makes 
it  a  duty  for  us  to  acknowledge  the  fact  that  the  Bourse  represents  one  of 
the  live  forces  of  France.  It  has  been  for  France  an  instrument  of  regen- 
eration after  defeat,  and  it  remains  for  us  a  powerful  tool  in  war  and  in 
peace.  Let  us  recall  the  already  remote  years  of  our  convalescence,  after 
the  invasion,  years  at  once  sorrowful  and  comforting,  when  with  the  gloom 
of  defeat  and  the  suffering  of  dismemberment,  mingled  the  joy  of  feeling 
the  revival  of  France.  Whence  came  our  first  consolation,  our  first  vindi- 
cation before  the  world?  Whether  glorious  or  not,  it  originated  on  the 
Bourse. 

"The  Paris  market  came  out  unscathed  from  the  ruins  of  the  war  and 
of  the  'commune' — and  straight  from  the  hardly  ratified  peace  and  quelled 
insurrection,  it  threw  itself  into  the  work  for  France's  regeneration;  because 
it  was,  indeed,  for  France's  regeneration  that  the  stockbrokers  and  mer- 
chandise brokers  worked  under  Thiers  and  MacMahon.  In  the  worst  days 
the  Bourse  had  the  uncommon  merit  of  showing  an  example  of  faith  in 
France.  When  more  than  one  political  skeptic  and  discouraged  thinker 
allowed  themselves  to  write  down  upon  the  crumbling  walls  of  our  burned- 
down  palaces  'Finis  Gallice,'  the  Bourse  kept  its  faith  in  France  and  her 
fortune,  and  that  faith  in  France  was  spread  by  it  all  around,  at  home  and 
abroad.  Speculation  was  patriotic  in  its  way;  it  has  exhibited  a  confidence 
in  our  resources  which  the  discretion  of  many  a  wise  man  rated  as  fool- 
hardy. Have  we  already  forgotten  our  great  loans  for  liberation?  With- 
out the  Bourse,  these  colossal  loans,  the  amount  of  which  exceeded  the 
dreams  of  financiers,  would  never  have  been  subscribed  for,  or,  if  ever,  it 
would  have  been  only  at  rates  much  more  onerous  for  the  country.  With- 
out the  Bourse,  our  French  rentes  would  not  have  taken  such  a  rapid  flight; 
our  credit,  restored  even  more  quickly  than  our  armies,  would  not  have 
equaled  that  of  our  victors,  on  the  very  morrow  of  our  defeat.  In  that 

221 


National    Monetary     Commission 

It  should  be  noted  that  during  that  period  of  activity, 
the  struggle  between  the  stockbrokers  and  the  curb 
brokers  almost  ceased.  The  hostile  brothers  seem  recon- 
ciled. But  when  business  shall  begin  to  slacken  again, 
when  events  shall  have  shaken  the  public's  confidence  in 
the  monopoly,  then  both  sides  will  resume  the  fight.6 
The  curb-brokers  will  exclaim  against  the  oppressive 
monopoly  and  demand  the  broadening  of  the  market, 
while  the  stockbrokers,  in  their  appeals  to  the  author- 
ities, will  say  of  their  competitors  that  they  represent 
anarchy,  robbery,  and  stockjobbery  in  its  worst  form, 

regard,  all  that  justice  demanded  us  to  say  previously  of  the  higher  banking 
institutions  may  with  right  be  repeated  concerning  the  Bourse. 

"To  those  who  lived  through  that  pale  dawn  of  France's  recovery,  that 
rush  of  the  Bourse  and  of  capitalists  to  offer  us  the  thousands  of  millions 
which  we  required  exceeded  the  eagerness  and  boldness  of  speculation. 
But  even  if  we  were  to  consider  it  but  gambling  and  betting  for  specula- 
tion, such  speculation  was  betting  for  France's  regeneration ;  it  bravely  placed 
its  bet  on  the  vanquished.  Those  national  and  foreign  financiers,  who 
have  been  accused  of  pouncing  upon  her  like  birds  of  prey,  brought  to  the 
noble  wounded  their  dollars  and  their  credit,  and  if  they  reaped  a  profit 
thereby,  are  we  to  reproach  them  for  it,  when  they  helped  us  to  recon- 
struct our  armies,  our  fleet,  and  our  arsenals?  If  France  regained  her  rank 
among  the  nations  of  the  world  so  quickly,  the  credit  for  it  should  be 
mainly  given  to  the  Bourse.  And  to  its  services  in  war,  we  should,  if  we 
wanted  to  be  just,  also  add  its  services  in  times  of  peace.  Without  the 
extensiveness  of  the  Paris  market,  and  the  stimulus  given  to  our  capital- 
ists through  speculation,  how  many  things  would  have  remained  unac- 
complished in  the  recklessly  overdriven  condition  of  our  finances?  We 
should  have  been  unable  to  complete  our  railroad  system,  or  renew  our 
national  stock  of  tools,  or  create  beyond  the  seas  a  colonial  empire  which 
shall  cause  France  to  be  again  one  of  the  great  world  powers.  When  the 
Bourse  is  on  trial,  such  credentials  should  not  be  overlooked.  Before  con- 
demning it  in  the  name  of  morality  and  private  interests,  a  patriot  should 
give  due  consideration  to  its  services  rendered  for  the  national  weal;  if 
all  its  defects  and  misdeeds  be  heaped  up  on  one  scale  tray,  then  services 
of  like  importance  will  easily  counterbalance  them."  (Anatole  Leroy- 
Beaulieu,  La  Rigence  de  V argent,  "Revue  des  deux  Mondes."  February  25, 
1897,  pp.  894  and  895.) 

&  A  proverb  says:  "Lorsqu'il  n'y  a  plus  de  join  au  ratelier,  les  chevaux  se 
battent"  (when  there  is  no  more  hay  in  the  manger,  horses  fight). 

222 


History    and   Methods   of  the   Paris    Bourse 

and  that  the  members  of  the  open  market  are  a  mob 
of  cosmopolitan  speculators  as  dangerous  for  the  State 
as  for  public  savings. 

Following  a  fit  of  speculation  in  shares  of  the  Union 
Generate,  which  had  taken  place  in  1882,  the  Lyons  stock- 
brokers were  unable  to  meet  their  engagements.  The 
Paris  stockbrokers  were  compelled  to  borrow  80,000,000 
francs.  Monopoly  was  seriously  injured  in  public  opinion, 
so  that  at  the  time  the  Government  brought  in  a  bill 
on  operations  for  future  delivery,  M.  Menard-Dorian,  also, 
brought  in  a  bill,  February  23,  1882,  making  the  profession 
of  stockbroker  free  to  everyone. 

The  question  was  divided  within  the  parliamentary 
commission,  for  the  problem  of  reorganizing  the  market 
was  more  complicated  than  that  of  recognizing  dealings 
for  future  delivery,  and  was,  therefore,  in  a  position  to 
prevent  the  solution  of  the  latter.  Yet,  though  clearly 
set,  the  problem  at  issue  was  not  solved,  as  has  happened 
many  a  time  in  the  case  of  other  problems. 

The  downfall  of  the  Union  Generate,  the  need  felt  by  the 
Bourse  to  avoid  being  spoken  of,  and  the  grave  threat  which 
M.  Menard-Dorian's  proposition  constituted  for  the  stock- 
brokers' association,  produced  the  result  that  the  official 
intermediaries  and  their  competitors,  the  unattached  inter- 
mediaries, refrained  from  asking  that  the  question  of  the 
financial  market  be  solved  in  Parliament.  The  republican 
dogma  was  not  at  all  favorable  toward  monopolies,  and  the 
Third  Republic  was  at  that  time  quite  apt,  in  the  eyes  of  the 
stockbrokers,  to  solve  the  question  of  monopoly — by  sup- 
pressing it.  The  heavy  depreciation  which  the  panic  pro- 
duced in  the  value  of  seats,  would  have  made  the  operation 


223 


National     Monetary     Commission 

an  easy  one  so  far  as  it  concerned  the  Treasury.  Thus  it 
happened  that  for  about  two  years  no  complaints  of 
stockbrokers  against  the  curb  brokers  (coulissiers)  were 
registered. 

(100)  On  September  21,  1892,  the  syndics  of  the  stock- 
brokers of  Paris,  Lyons,  Bordeaux,  Nantes,  Toulouse, 
and  Lille  collectively  asked  the  Minister  of  Finance  to 
demand  the  suppression,  by  every  legal  means,  of  the 
"petite  bourse"  (curb  meeting)  which  took  place  every 
night  at  9  o'clock  in  the  hall  of  the  Credit  Lyonnais. 
They  claimed  that  any  depreciation  in  the  prices  of 
government  securities  that  might  show  itself  on  the 
market  would  instigate  a  general  panic. 

The  surprised  curb  brokers  called  attention  to  the  fact 
that  the  rente  5  per  cent  had  fluctuated  between  18  and 
40  francs  in  1800,  and  that  in  1892  it  had  reached  106 
francs.  They  added  that  the  3  per  cent  rente,  which  had 
been  quoted  at  60  in  1825,  and  which  had  fluctuated 
between  50.30  and  58.45  in  1871,  was  quoted  at  100  in 
September,  1892,  on  the  very  day  when  the  stockbrokers 
sent  in  their  petition,  after  having  been  quoted  at  95  in 
the  beginning  of  the  year. 

The  ground  invoked  against  the  Coulisse  was  cer- 
tainly piteous,  but  it  was  nevertheless  true  that  the 
stockbrokers  were  within  their  right  when  they  demanded 
that  the  "little  bourse"  be  suppressed.0 

They  undertook  to  forbid  the  Coulisse  to  gather  during 
the  evening  in  the  place  where  it  used  to  meet — that  is 
to  say,  in  a  covered  inclosure  in  the  hall  of  the  Credit 

aTo  hold  meetings  of  merchants  or  bankers  elsewhere  than  on  the 
Bourse,  and  at  the  appointed  hours,  is  forbidden  by  article  3  of  the  law  of 
27  Prairial,  year  X. 

224 


History   and   Methods   of  the   Paris    Bourse 

Lyonnais;  but  they  could  meet  on  the  highway  in  the 
Galerie  d' Or  leans.  That  victory  of  the  stockbrokers  was, 
therefore,  only  a  "  paper  "  success.  The  question  of  taxing 
bourse  operations  was  again  going  to  fan  the  flames. 

(101)  On  several  occasions — notably,  on  December  15, 
1891,  November  1 4  and  15,1 892 — bills  due  to  parliamentary 
initiative  were  introduced  on  the  subject  of  taxing  bourse 
operations.  On  December  22,  1892,  a  bill  of  that  sort, 
introduced  by  M.  Jourde,  was  thrown  out  by  281  votes 
against  232,  upon  the  remarks  made  by  M.  Tirard,  the 
Minister  of  Finance,  and  M.  Rouvier,  a  former  Minister 
of  Finance.  The  speakers  had  demonstrated  how  diffi- 
cult it  was  to  collect  such  a  tax.  Were  they  to  tax  the 
operations  of  the  stockbrokers  exclusively?  That  would 
be  giving  the  curb  brokers  an  advantage.  Were  they 
to  tax  the  operations  of  the  curb  brokers?  That  would 
mean  to  recognize  them,  they  thought.  Then,  should 
the  Coulisse  be  suppressed?  This  could  not  be 
thought  of.  Should  it  be  recognized?  That  was  a  grave 
question.  In  any  case,  the  question  was  to  be  studied 
by  itself,  independently  of  the  tax  question. 

However,  the  Minister  of  Finance  had  declared  that,  in 
principle,  he  was  not  opposed  to  the  taxation.  The 
difficulty  which  it  presented  was  the  only  thing  "that 
restrained  him.  It  did  not  restrain  him  long,  however. 

On  January  14,  1893,  M.  Tirard  introduced  a  bill 
having  in  view  the  establishment  of  the  tax.  The  new 
provisions  were  to  be  introduced  in  the  finance  law  of 
1893,  which  had  not  yet  been  voted  on.  The  difficulty 
was  removed  in  the  manner  of  the  cutting  of  the  Gordian 
knot  by  Alexander;  the  Coulisse  was  to  be  suppressed. 


225    . 


National     Monetary     Commission 

Indeed,  according  to  the  terms  of  the  bill,  every  bourse 
operation  was  to  be  subject  to  a  tax  reckoned  off  on  a 
journal,  every  article  of  which,  for  the  securities  admitted 
on  the  official  quotation  list,  was  to  specify  the  name  and 
address  of  the  stockbroker  through  whom  the  trans- 
action had  been  effected.  The  tax  could  be  paid  only 
by  the  stockbroker,  and,  consequently,  every  inf ringer 
would  not  only  be  guilty  of  unwarranted  interference 
with  the  functions  of  a  stockbroker,  according  to  the  old 
legal  conditions,  but  would  also  be  guilty  of  infringing 
the  revenue  laws.  Each  infringement  would  be  subject  to 
a  fine  equal  to  one-twentieth  of  the  value  of  the  securities. 

The  Coulisse  itself  would  have  been  permitted  to  pay 
the  tax  only  on  unlisted  securities.  Their  number  was 
very  limited.  Rio  Tinto,  which  before  long  was  to  be 
dealt  in  on  the  Parquet,  the  Alpine,  Tharsis,  and  De 
Beers,  were  really  the  only  securities  which  had  a  consider- 
able circulation,  without,  however,  being  of  sufficient  vol- 
ume to  supply  the  needs  of  such  a  market,  as  was  the 
bankers'  market.  The  struggle  was  on.  Viewed  from  the 
standpoint  of  the  parties  interested,  the  belligerents 
seemed  both  to  be  wrong  in  accepting  the  principle  of 
taxation;  and  M.  Tirard,  Minister  of  Finance,  took  ad- 
vantage of  that  fact  before  Parliament. 

"Gentlemen,"  said  the  Minister,  "you  have  just  been 
told,  with  good  reason,  that  at  first  all  were  opposed  to 
the  tax,  claiming  that  it  would  greatly  disturb  the  Paris 
market,  and  that  it  would  give  an  advantage  to  the 
foreign  markets.  And  then,  after  due  reflection,  the 
stockbrokers  said  to  themselves :  *  Perhaps  the  Govern- 
ment, in  order  to  collect  the  stamp  tax  payable  upon 


.  226 


History   and   Methods   of  the   Paris    Bourse 

the  memorandum  account,  will  be  forced  to  apply  to  us, 
because  it  could  not  through  its  finance  law  approve  an 
illegal  and  unlawful  act.  We  should  thus  obtain  a  more 
formal  acknowledgment  of  the  rights  which  we  have  up 
to  this  day  rather  precariously  exercised  through  our  own 
fault.'  On  their  side,  the  curb  brokers,  no  doubt,  said  to 
themselves :  '  It  is  quite  possible  that  the  Government  will 
shrink  before  the  severity  of  the  proposed  collection  of 
the  tax  it  intends  to  create  and  that,  on  that  account, 
it  may  permit  all  those  doing  bourse  operations  to  pay 
the  stamp  tax,  without  inquiring  whether  they  be  lawful 
or  illegal  operations.' 

"Then,  what  was  at  the  beginning  a  source  of  trouble 
and  worry — the  fear  of  placing  a  large  portion  of  the  Paris 
business  in  jeopardy — all  that  disappeared,  in  the  hope 
that  the  respective  condition  of  both  parties  would  be 
benefited  through  the  tax  levy. 

"  I  have,  therefore,  concluded  that  when  people  have  no 
anxiety  about  the  general  welfare,  because  they  feel  at 
ease  concerning  their  personal  welfare,  it  is  to  be  supposed 
that  the  general  welfare  was  not  compromised  (very  good) 
and  that  the  trifling  tax  we  propose  levying  on  bourse 
operations  is  not  calculated  to  be  detrimental  to  the 
French  market." 

Thus  spoke  the  Minister  of  Finance.0 

"  Let  the  tax  strengthen  our  monopoly,"  said  the  stock- 
brokers, "and  our  operations  alone  will  be  legal."  "Let 
the  tax  free  the  financial  market,"  replied  the  curb  brokers. 
"  If  the  redemption  of  the  offices  is  the  main  obstacle 

aChambre,  D6bats  Parlementaires,  2$et  24  fevrier,  1893.  Journal  Officiel, 
24  et  25  ffrvrier. 


227 


National     M  on  et  ar  y     Co  mm  is  s  i  o 


n 


to  an  open  market,  would  it  not  be  just  that  the  yield 
of  the  tax  be  appropriated  for  that  redemption  ?  If  we 
are  to  be  taxed,  well  and  good,  but  let  the  money  we 
pay  in  be  used  in  freeing  us.  Let  the  tax  pay  the  cost 
of  reform.  This  is  its  object  after  all,  and  the  only 
vindication  for  it." 

Had  they  only  been  satisfied  with  the  use  of  such 
arguments!  *  *  *  But  such  was  not  the  case. 

The  controversy  was  exceedingly  bitter.  Pamphlets, 
newspaper  articles  crossed  each  other.  Libels  followed 
one  another  with  astonishing  rapidity.  Adversaries  chal- 
lenged one  another,  like  Homer's  heroes,  while  in  Parlia- 
ment there  began  a  debate  which  was  marked  by  a  good 
deal  of  passion.0 

(102)  M.  Tirard's  bill  was  adopted  by  the  Chamber 
of  Deputies  on  February  24,  1893.  But  in  the  Senate, 
through  the  intervention  of  the  reporter-general  of  the 
finance  commission,  M.  E.  Boulanger,  it  was  thought 
that  the  question  of  organizing  a  financial  market  was 
too  important  to  be  settled  one  way  or  another,  through 
a  vote  on  the  budget.  The  severance  of  that  project 
from  the  finance  law  was  voted  on  March  28,  1893. 

Two  days  later,  on  March  30,  the  Minister,  who  had 
been  unable  to  carry  the  Chamber  on  a  question  of  severing 
from  the  budget  a  plan  of  reform  on  the  taxing  of  bever- 

°The  following  took  part  in  the  debate:  MM.  Tirard,  Minister  of 
Finance;  Poincare,  Reporter-General;  Gauthier  (de  Clagny),  Jourde — all 
speaking  in  favor  of  it ;  Yves  Guyot,  who  advocated  the  nominating  of  a 
special  commission  for  the  purpose  of  inquiring  into  sundry  plans  in  regard 
to  bourses;  Naquet,  against  the  very  principle  of  tax;  F61ix  Faure,  who 
advocated  a  counter  plan,  first  accepted  and  then  discarded  by  the  budget 
commission,  which  plan  allowed  the  payment  of  taxes  by  affixing  stamps; 
Jullien,  in  opposition  to  the  Government's  bill. 


228 


History    and    Methods    of  the   Paris    Bourse 

ages,  withdrew,  and  M.  Peytral  succeeded  M.  Tirard  as 
Minister  of  Finance.  The  new  Minister  proposed  a  waiting 
policy  to  Parliament.  The  bourse  tax  was  to  be  col- 
lected without  making  it  necessary  for  the  Government 
to  trouble  itself  about  the  legality  of  the  transaction. 
All  those  subjected  to  the  keeping  of  a  bourse  record 
would  have  to  deposit  in  the  registration  office  copies  of 
said  record  on  fixed  dates,  and  heavy  fines  would  be 
imposed  upon  all  infringements  or  frauds. 

The  bill  was  passed.  It  was  placed  in  the  finance  law 
of  April  28,  1893. 

In  January,  1 894,  the  conversion  of  the  4^  per  cent  rentes 
into  3%  per  cent  rentes  was  decided  upon.  The  operation 
was  entirely  successful.  In  1895  the  Minister  of  Finance, 
M.  Doumer,  having  stated  that  the  tax  was  as  much  of  a 
burden  on  the  open  market  transactions  as  on  those  of  the 
official  market,  demanded  that  the  tax  on  transactions  in 
French  rentes  be  reduced  by  three-quarters . a  The  demand 
was  soon  granted,  in  pursuance  of  a  favorable  report  by 
M.  Georges  Cochery ,  reporter -general  for  the  budget  of  1 896. 

But  the  solution  reached  on  April  28,  1893,  was,  as  we 
stated,  only  provisional.  M.  Tirard,  while  praising  his 
system,  which  had  not  prevailed,  had  promised  to  inquire 
into  a  reorganization  of  the  market  within  a  short  time, 
and  M.  Felix  Faure  answered  him:  "  I  trust  that  when  we 
shall  occupy  ourselves  with  the  organization  of  the  finan- 
cial market,  we  shall  succeed  in  suppressing  monopoly."6 

aChambre  des  Deputes.  Journal  Officiel,  14  Decembre,  1895.  See  also 
Maurice  Jobit:  Les  Titres  Grangers  et  la  loi  fiscale,  1896.  Annexes  p.  116 
(surVart.  8,  de  la  loi  de  finances  du  27  dec.  1895). 

AChambre  des  Deputes,  Seance  du  24.  Ffrvrier,  1893.  Journal  Officiel  du 
25  F&vrier. 


229 


National     Monetary     Commission 

The  system  presented  by  M.  Peytral  having  prevailed,  M. 
Peytral,  as  Minister  of  Finance,  undertook  the  same  task 
as  his  predecessor.  "We  acknowledge, there  is  need  to 
proceed  with  the  reorganization  of  the  French  market. 
We  intend  doing  it  by  means  of  a  complete  plan,  estab- 
lishing a  legal  organization  which  shall  be  based  on 
freedom,  but  without  excluding  regulation.  Such  a  plan 
is  under  advisement."  ° 

Well,  that  plan  has  never  been  submitted  to  considera- 
tion, for  what  reasons  is  not  known.  And  meanwhile 
there  broke  out  what  has  since  been  called  the  "gold 
mines  boom." 

(103)  About  the  middle  of  1894  most  publications  treat- 
ing of  economic  questions  described  the  great  industrial 
development  brought  about  in  the  Transvaal  by  the  gold 
seekers.  Gold  mining  in  the  Transvaal  during  the  ten 
previous  years  had  given  rise  to  speculation  on  the  Trans- 
vaal and  English  bourses.  This  speculation,  like  every- 
thing else  in  this  world  of  ours,  had  its  good  as  well  as 
its  bad  sides.  In  the  south  of  Africa,  not  far  from  the 
mines,  bourses  were  opened,  and  there  took  place  some 
skyrocketing  of  quotations,  followed  by  violent  breaks. 
These  fluctuations  above  and  below  the  real  value  which 
is,  moreover,  quite  difficult  to  ascertain,  bring  to  your 
mind  the  air  bubble  near  the  water  level,  which  oscillates 
in  the  neighborhood  of  the  spot  where  it  is  going  to  settle. 
Some  have  since  endeavored  to  compare  the  speculation 
to  which  the  South  African  mines  have  given  rise,  to  the 
"  tulipomania "  which  raged  in  Holland  about  1634,  and 
to  those  "manias"  of  which  M.  Leon  Say  speaks  in  his 

a>Ibid.,  28  Amil,  1893,  Journal  Officiel  du  29. 
230 


History    and    Methods    of  the    Paris    Bourse 

work  "  Sur  les  Interventions  du  Tresor  a  la  Bourse"  or  also 
Bagehot,  in  his  book  on  the  "  Money  Market."  To  be  sure, 
there  was  a  good  deal  of  extravagance  in  the  speculations 
which  took  place,  but  the  criticisms  drawn  up  against  the 
mining  companies  and  those  who  brought  out  their  securi- 
ties, have  likewise  been  singularly  extravagant.  Thanks  to 
the  Transvaal  mines,  roads  and  railroads  have  been  built, 
cities  have  sprung  up,  profiting  at  one  stroke  from  all  the 
modern  improvements  in  the  art  of  construction.  Indus- 
try has  opened  South  Africa  and  preserved  it  for  Euro- 
pean civilization,  and,  all  in  all,  there  has  been  an  increase 
of  wealth,  of  which  the  English  and  German  capitalists 
alone  seemed  at  the  first  moment  to  have  the  immediate 
profit. 

But  in  the  course  of  1894  English  houses  commenced 
some  advertising  in  Parisian  newspapers,  and  soon  there 
was  noticed  a  pretty  strong  stream  of  bourse  orders  toward 
the  London  market.  Some  bankers  thought  that  the 
French  market  should  share  in  the  profit  derived  from 
this  stream,  which  the  London  Stock  Exchange  seemed 
to  have  monopolized;  they  opened  negotiations  with 
English  bankers,  and  discussed  the  terms  on  which  the 
Transvaal  mining  securities  could  be  introduced  on  the 
Paris  market.  It  was  mostly  in  the  bankers'  market 
that  they  were  introduced. 

On  June  30,  1894,  only  3  kinds  of  gold- mining  shares 
were  dealt  in  on  the  market  for  future  delivery  of  the 
bourse  for  securities  (marche  a  terme  de  la  bourse  des 
valeurs) — including  the  Robinson,  already  dealt  in  before, 
and  the  Randfontein.  Six  months  later — on  December 
31 — there  were  7,  of  which,  however,  i  was  American. 


231 


National     M on  et ar y     Commission 

There  were  12  on  June  30,  1895.  On  December  31,  1895, 
32  kinds  of  securities  of  gold  mines,  real  estate  com- 
panies, and  colonial  exploration  companies  were  negotiated 
for  future  delivery  in  the  Coulisse.  At  that  same  date 
there  were  dealt  in  for  cash  (au  comptant)  66  kinds  of 
gold-mining,  coal,  colonial  exploration  companies,  among 
which,  of  course,  should  be  numbered  the  32  entered  on 
the  market  for  the  account  (marche  a  terme).  In  the 
London  market  these  securities  were  counted  by  the 
hundreds  and  represented  thousands  of  millions. 

The  Coulisse  was  not  quite  alone  in  fostering  the 
movement.  If  it  operated  in  Transvaal  mining  shares, 
it  was  because  the  shares  of  these  enterprises  were  of  a 
nominal  value  of  25  francs,  and  the  decrees  of  February 
6,  1880,  and  December  i,  1893,  did  not  permit  securities 
to  be  admitted  on  the  official  quotation  list,  if  the  par 
value  of  their  shares  was  less  than  that  authorized  for  the 
French  companies  by  the  laws  of  July  24,  1867,  and 
August  i ,  1 893.  The  stockbrokers'  association  (compagnie 
des  agents  de  change)  later  admitted  on  the  official  list  the 
shares  of  ''Treasury"  and  "  Robinson  Banking."  It  had 
such  a  good  opinion  of  the  Transvaal  gold  mines  that 
it  led  its  customers  into  large  speculations  in  Modder- 
fontein.a  Through  the  attorneys  for  the  offices  many 
stockbrokers  had  become  interested  in  the  Nevmann  syndi- 
cate, whose  object  was  to  place  mining  stocks  in  Paris 
and  London.  (We  know  that  the  head  of  the  Nevmann 
syndicate  subsidized  the  Jameson  expedition.)  Finally, 

a  See  the  report  of  M.  G.  Graux  on  his  bill  having  in  view  the  creation 
of  shares  of  25  francs.  Chambre  des  Deputes,  Stance  de  1896,  No.  1950,  in 
the  appendices,  p.  31.  Hearing  of  the  well-known  M.  de  Verneuil,  syndic 
of  the  association  of  stockbrokers. 

232 


History   and   Methods   of  the   Paris    Bourse 

on  November  15,  1895,  a  Banque  Francaise  de  VAfrique 
du  Sud  (French  Bank  of  South  Africa)  was  established, 
and  the  president  was  none  other  than  the  well-known 
M.  Herbault,  syndic  of  the  Stockbrokers'  Association  of 
Paris  (Syndic  de  la  Compagnie  des  Agents  de  Change  de 
Paris),  who  had  resigned  his  office  in  order  to  become 
president  of  the  new  bank.0 

At  any  rate,  on  January  i,  1896,  the  Transvaal  was 
invaded  by  a  troop  of  volunteers  under  the  command  of 
Doctor  Jameson.  When  it  was  ascertained  that  this 
expedition — this  raid,  as  it  was  called — had  failed  and  that 
the  relations  between  the  Governments  of  President 
Kruger  and  of  England  were  much  strained,  a  sudden 
depreciation  took  place  in  Transvaal  securities,  and  the 
previous  boom  was  succeeded  by  the  gold-mines  panic.  If 
the  disaster  of  the  Union  Generate  had  not  swept  away  the 
Compagnie  des  Agents  de  Change  (saved  by  the  slowness 
of  parliamentary  procedure),  the  disaster  of  the  gold 
mines  was  going  to  carry  off  the  Coulisse,  which  through 
clever  manipulations  was  to  be  alone  held  responsible 
before  Parliament  for  the  decline  and  the  damages  result- 
ing therefrom. 

(104)  The  gold-mining  boom  had  incensed  the  Com- 
pagnie des  Agents  de  Change.  No  doubt  they  had  shared 
in  the  negotiations  of  mining  securities,  but  not  in  the 
measure  they  would  have  liked.  The  "Bulletin  de  Statis- 
tique  et  de  legislation  comparee  duMinistere  des  Finances"  b 
showed  that  from  1893  to  1895,  inclusive,  of  the  35,596,000 

a  Economists  Frangais  of  January  27,  1900.  The  Nevmann  syndicate 
was  liquidated  and  reorganized  under  the  name  of  "Association  Minidre," 
the  shares  of  which  are  quoted  on  the  Official  List  March  6,  1905. 

&  January,  1898,  p.  52. 


233 


National    Monetary     Commission 

francs  yielded  by  the  tax  on  bourse  operations  there  had 
been  collected  outside  of  Paris  1,707,291  francs,  and  in 
Paris,  through  the  stockbrokers  11,758,542  francs,  while 
all  other  parties  subject  to  the  tax — curb  brokers,  money 
changers,  credit  institutions,  bankers — had  paid  in 
22,130,167  francs,  i.  e.,  double  the  amount. 

First  the  stockbrokers  thought  of  taking  the  gold  mines 
away  from  the  Coulisse,  or  at  least  of  taking  advantage  of 
an  exceedingly  timely  offer  made  to  them  through  a  truly 
providential  chance  by  M.  Georges  Graux,  a  deputy,  with 
whom  M.  Meline  associated  himself.  On  October  26, 1895, 
M.  Georges  Graux  introduced  a  bill  tending  to  authorize 
the  creation  of  2  5 -franc  shares  in  French  stock  compa- 
nies (the  law  permits  that  denomination  only  for  companies 
having  a  capital  of  200,000  francs  or  less) .  On  the  day  when 
French  companies  could  be  organized  with  25-franc  shares, 
no  principle  would  stand  in  the  way  of  admitting  foreign 
25-franc  shares  on  the  official  list.  M.  Georges  Graux  was 
appointed  reporter  of  his  bill.  He  handed  in  his  report 
on  June  2 2, 1 896,  and,  though  the  gold-mine  panic  was  in 
full  swing  at  the  time,  the  worthy  reporter  urged  that 
his  bill  be  adopted,  the  result  of  which  would  have  caused 
the  gold  mines  to  be  transferred  to  the  Parquet. 

The  stockbrokers  would  then  be  in  a  position  to  benefit 
by  the  recovery  in  mining  stocks. 

The  report  was  never  brought  to  debate.  To  tell  the 
truth,  that  document  was  of  such  little  substance  that 
it  could  not  have  survived  the  first  words  in  an  open 
debate. a  The  author ,  in  view  of  the  comments ,  which  were 
not  spared  in  the  special  organs,  failed  to  uphold  his  work, 

a  Chambre  des  DepiU&s,  session  1 896 ;    Documents  Parlementaires,  No.  1950. 

234 


History   and   Methods    of  the   Paris    Bourse 

in  spite  of  the  evident  parliamentary  influence,  and  in 
spite  of  the  fact  that  the  Honorable  M.  Meline  had  indorsed 
his  proposition. 

As  we  have  seen,  the  rise  in  gold-mining  shares  had 
awakened  the  envy  of  the  stockbrokers — a  feeling  no 
doubt  quite  justified,  since  commercial  competition  has 
no  other  incentive.  The  decline  which  followed  was  to 
be  taken  advantage  of  by  their  supporters  in  Parliament 
at  a  propitious  opportunity.  And  that  propitious  oppor- 
tunity presented  itself. 

The  reorganization  promised  by  the  Minister,  M. 
Peytral,  had  been  neither  studied  nor  prepared  in  the 
Ministry  of  Finance.  Two  worthy  senators,  MM. 
Tarieux  and  Boulanger,  on  June  29,  1897,  introduced  a 
bill  relative  to  the  exercising  of  the  profession  of  stock- 
broker. A  summary  report  of  M.  Pauliat  advocated 
that  the  bill  be  taken  up  for  consideration.  A  commission 
was  appointed;  stockbrokers  and  curb  brokers  appeared 
before  it.  The  Senate  was  called  upon  to  inquire  into  the 
matter.  At  that  time  a  desire  to  drop  the  matter  became 

manifest. 

•« 

(105)  During  the  discussion  of  the  budget  of  1898  in 
the  Chamber,  two  deputies,  MM.  Lacombe  and  Fleury- 
Ravarin,  each  introduced  an  amendment,  worded  almost 
identically,  with  the  exception  of  the  final  paragraph. 
Later,  M.  Lacombe  withdrew  his  amendment  in  order  to 
associate  himself  unconditionally  with  his  colleague. 

The  provisions  of  the  Fleury-Ravarin  amendment  were 
worded  as  follows: 

"Whoever  makes  it  a  business  to  take  up  bids  and 
offers  on  bourse  securities  must,  whenever  called  upon  to 


235 


National     Monetary     Commission 

do  so  by  the  Registry  Office  agents,  when  it  is  a  question 
of  securities  admitted  on  the  official  quotation  list,  ex- 
hibit stockbrokers'  statements  or  give  particulars  of  the 
numbers  and  dates  of  statements,  as  well  as  of  the  names 
of  the  stockbrokers  from  whom  they  emanate,  and,  when 
it  is  a  question  of  securities  not  admitted  on  the  official 
quotation  list,  personally  pay  the  amount  of  the  tax." 

This  was  merely  returning  to  the  scheme  of  M.  Tirard. 
The  Minister  of  Finance,  the  Honorable  M.  Georges 
Cochery,  stated  before  the  budget  commission  that  he 
would  assent  to  that  amendment,  and  that  the  Govern- 
ment, represented  by  the  Honorable  M.  Meline,  concurred 
in  this,  in  order  to  preserve  for  the  Bourse  the  existing 
legislation,  save  for  the  modifying  of  certain  petty  details 
through  decrees.  This  procedure  would,  of  course,  result 
in  putting  a  check  upon  the  proposition  submitted  to  the 
Senate;  but,  said  the  Minister,  the  Stockbrokers'  Associ- 
ation (Compagnie  des  Agents  de  Change)  had  brought  in 
a  complaint  before  the  courts  against  the  curb  brokers, 
and  it  was  necessary  that  the  financial  market  be  not 
disturbed  by  the  incidents  of  a  lawsuit  such  as  was 
certain  to  be  started. a 

a  Should  the  Government  have  ever  given  in  under  such  pressure? 
How  can  the  State  prevent  the  stockbrokers  from  applying  to  the  courts, 
if  they  consider  themselves  wronged?  This  is  their  inalienable  right- 
The  Government  had  only  to  let  them  act;  the  interested  parties  would 
certainly  have  looked  after  their  own  interests,  and  finally  the  stockbrokers, 
when  better  advised,  would  not  have  persisted  in  their  original  intention. 
The  judges  would  have  weighed  and  decided  according  to  the  law  and 
the  facts;  if  the  law  had  favored,  and,  let  us  say,  does  favor,  the 
agents  of  the  monopoly,  facts  would  have  been  stronger  than  the  law, 
and  would  have  found  them  to  be  wrong.  In  their  own  interest  the 
stockbrokers  and  the  curb  brokers  would  at  last  have  come  to  an  under- 
standing. The  State  had  no  reason  to  interfere.  (Alfred  Neymarck, 
Journal  Le  Rentier,  March  17,  1898.) 

236 


History   and   Methods   of  the   Paris   Bourse 

The  Fleury-Ravarin  amendment  was  voted  on  in  the 
Chamber  and  even  in  the  Senate.0 

(106)  The  Fleury-Ravarin  amendment  became  article 
14  of  the  law  of  April  13,  1898,  and  three  decrees,  dated 
June  29,  1898,  were  published  in  the  ''Journal  Officiel" 
of  June  30,  in  view  of  the  reorganization  of  the  financial 
market  promised  by  the  Minister  of  Finance  during  the 
debate  on  the  budget. 

Through  the  first  decree,  articles  17,  55,  and  56  of  the 
decree  of  October  7,  1890,  were  modified.  Article  17 
treats  of  the  composition  of  the  syndical  chambers  of 
stockbrokers.  Articles  55  and  56  express  the  conditions 
under  which  the  syndical  chambers  are  bound  to  execute 
a  trade  in  place  of  a  defaulting  stockbroker.  Thus  was 
the  solidarity  of  stockbrokers  established.6 

« In  the  Chamber  of  Deputies  the  following  took  part  in  the  debate: 

Session  of  March  7,  1898:  MM.  Lhopiteau,  Fleury-Ravarin,  Georges 
Cochery,  Minister  of  Finance;  Viviani,  Gauthier  de  Clagny,  Gabriel 
Dufaure,  and  Ribot. 

Session  of  March  8:  MM.  Krantz,  Viviani,  Georges  Cochery,  Minister 
of  Finance;  Gauthier  de  Clagny,  and  Fernand  Cremieux. 

Vote:  In  favor  of,  333;  against,  136. 

In  the  Senate,  on  April  2,  1898,  the  following  took  part  in  the  debate: 

MM.  Raynal,  Eugene  Guerin,  Gouin,  Georges  Cochery,  Minister  of 
Finance,  and  Prevet  de  Lamarzelle. 

The  severance  of  the  amendment  was  put  aside  by  142  votes  against 
131,  and  this  was  passed  by  a  vote  of  hands. 

&The  solidarity  was  established  under  the  following  circumstances:  On 
March  8  M.  Viviani  caused  the  Chamber  of  Deputies  to  adopt  two  amend- 
ments— one  establishing  the  solidarity  of  the  stockbrokers,  the  other 
that  the  books  of  the  stockbrokers  should  be  audited  by  treasury  inspect- 
ors. The  Ministry  of  Finance  caused  these  two  provisions  to  be  set  aside 
by  the  Senate,  after  which  the  solidarity  of  stockbrokers  was  established 
by  the  decree  of  June  30,  1898,  as  stated  above.  The  legality  of  the  pro- 
ceeding is  very  debatable.  According  to  article  1202  of  the  Code  civil, 
solidarity  (outside  of  solidarity  by  mutual  agreement)  can  be  declared 
only  by  law. 


237 


National     Monetary     Commission 

The  second  decree  increased  the  number  of  stockbrokers 
of  the  Paris  Bourse  to  seventy,  and  the  third  decree 
treated  of  the  brokerage  rates,  modifying  those  pre- 
viously established  by  the  stockbrokers  themselves. 

In  general,  the  new  rate  prescribed  was  o.io  percent, 
where  the  old  one  was  0.12%  per  cent,  and  the  bro- 
kerage for  the  transactions  in  French  rentes  was  fixed 
at  12.50  francs  for  the  one-half  unit  of  speculation,0  while 
the  old  rate  was  20  francs.  On  the  other  hand,  the  private 
regulations  of  the  stockbrokers  of  December  3,  1891,  were 
modified.  The  maximum  number  of  chief  clerks  was  in- 
creased to  six  (it  was  previously  four) .  Provisions  were 
made  that  the  settlement  of  cash  transactions  in  certifi- 
cates to  bearer  be  effected  before  the  fifth  bourse  session 
following  the  session  when  the  operation  was  made.  How- 
ever, from  January  30,  1899,  this  delay  was  extended  until 
the  tenth  Bourse,  and  the  obligation  for  the  stockbroker 
with  unadjusted  claims  to  "execute"  (buy-in  or  sell-out, 
compel  settlement  by)  his  fellow-member  in  arrears  was 
replaced  by  the  right  of  recourse  to  the  procedure  of  "exe- 
cution." Finally,  on  July  12,  1901,  a  new  tariff,  raising 
brokerage  rates,  was  established  by  M.  Cailloux,  Minister 
of  Finance.  The  minimum  of  50  centimes  was  fixed.  The 
brokerage  fee  was  increased  to  0.25  franc  for  each  share 
or  bond  worth  less  than  250  francs  and  0.50  franc  for 
securities  the  prices  of  which  range  between  250  and  500 
francs. 

The  reorganization  of  the  financial  market  had  there- 
fore been  "botched  up"  under  the  queerest  circum- 
stances. They  had  come  back  to  the  Tirard  system 

"See  Nos.  16  and  38,  Book  II. — Translator. 
238 


History    and   Methods   of  the   Paris    Bourse 

through  the  Fleury-Ravarin  amendment,  we  said;  but 
M.  Tirard  himself,  although  in  favor  of  the  stockbrokers' 
monopoly,  had  agreed  that  the  question  of  organizing  a 
public  market  was  one  of  those  whose  solution  could 
not  be  improvised  and  which  could  not  be  withheld 
from  public  discussion.  Answering  M.  Nivert,  M.  Tirard 
said,  on  February  24,  1893:  "After  a  vote  has  been  taken 
on  the  bill  submitted  to  your  deliberation,  I  have  in 
mind  to  place  the  consideration  of  this  question  before 
the  Council  of  State,  and  to  prepare  a  bill  which  shall 
have  the  advantage  of  having  been  thoroughly  studied." 
Well,  the  question  proposed  in  1898  was  the  same  as  in 
1893.  Monopoly  or  freedom  of  brokerage,  or,  also,  a 
mixed  system,  admitting  of  regulated  freedom.  Two 
senators  spoke  for  freedom.  In  the  meanwhile  an 
amendment  to  the  budget  changed  the  mode  of  collecting 
the  tax;  and  there  you  are.  By  means  of  decrees  a 
Minister  revises  brokerage  rates,  arranges  for  the  appoint- 
ment of  ten  stockbrokers,  institutes  a  solidarity  of  doubt- 
ful legal  standing,  and  calls  that  operation  a  "reorgani- 
zation." Legally,  even  the  very  word  "reorganization" 
can  not  be  used.  Laws  can  not  be  modified  by  decrees; 
and,  as  decrees  are  based  on  laws  already  existing,  it 
would  be  more  correct  to  say  that  there  was  a  sup- 
pression of  the  question  of  reorganizing  the  financial 
market,  which  had  been  proposed  by  two  senators  after 
the  Government  had  failed  to  do  so.  It  is  hardly  possi- 
ble to  understand  at  present  how  a  question  which  in  1893 
required  such  an  extremely  exhaustive  study  in  the  eyes  of 
M.  Tirard  and  of  all  others,  could  be  touched  upon  and 
decided  in  the  circumstances  detailed  above — that  is  to 


239 


National     M on  et ar y     Commission 

say,  under  the  most  unwonted  circumstances  and  the 
most  contrary  to  precedent. 

(107)  For  what  reasons  was  the  bill  announced  by  M. 
Peytral  never  submitted  to  consideration?  For  what 
reasons  was  the  bill  proposed  by  the  two  senators  in  some 
way  withdrawn  from  the  Senate?  For  what  reasons  did 
the  Meline  ministry  in  1 898  entangle  itself  in  that  strange 
procedure,  contrary  to  all  precedents  in  legislative  mat- 
ters? These  are  points  which  have  never  been  cleared 
up,  and  concerning  which  the  parties  most  interested  seem 
to  desire  to  avoid  all  discussion. a  Some  explanations  of 
that  little  financial  and  parliamentary  coup  d'etat  have 
been  furnished,  but  the  moderation  necessary  for  the 
present  study  does  not  allow  our  reproducing  them  here. b 

The  following  reasons  may  be  substituted  for  or  added 
to  the  above :  We  know  that  in  matters  of  political  econ- 
omy the  regime  of  commercial  treaties  was  superseded  by 
the  regime  of  tariff  maximum  and  minimum  in  1892.  A 
strong  protectionist  current  had  become  apparent  in  the 
political  spheres  since  1878.  M.  Meline  was  the  leader 
thereof.  In  the  newspaper  world  some  writers  had  made 
themselves  the  champions  of  international  bimetallism 
and  protectionism,  especially  MM.  Edm.  Thery  and  Jules 
Domergue.  The  Stockbrokers'  Association  (Compagnie 
des  agents  de  change)  expressed  its  fellow-feeling  at  an 
early  date,  and  gave  its  support  to  the  bimetallist  and 
protectionist  movement,  either  from  economic  convic- 
tion or  through  design,  thinking  that  economic  parties 

a  Congres  International  des  valeurs  mobilieres  de  1900  a  Paris.     Stance  du 
6  juin,  1900.     Compte-Rendu  (Paul  Dupont,  imprimeur.) 
&  Journal  I' Action  of  November  7  and  December  12,  1903. 


240 


History    and   Methods    of  the    Paris    Bourse 

become  political  parties  and  that  political  parties  have 
their  expression,  when  they  are  successful,  in  executive 
power.  The  Meline  ministry  was,  therefore,  in  power 
in  1898;  it  rewarded  those  who  had  supported  it,  while 
the  protectionist  and  nationalist  papers  directed  a 
virulent  campaign  against  the  Coulisse.  The  time  had 
been  admirably  chosen.  We  know  what  painful  strife 
had  taken  place  in  the  country  concerning  the  Dreyfus 
affair.  In  1898  the  question  of  knowing  whether  there  was 
ground  or  not  to  review  the  military  trial  of  1894  was 
obscured  by  passions.  If  anyone  wanted  to  see  the  trial 
reviewed,  he  was  a  traitor  to  his  country,  an  opponent  of 
the  army,  an  enemy  of  order,  a  conspirator  against  the  fair 
name  of  France  abroad,  and  even  against  the  credit  of  the 
State.  On  the  other  hand,  if  anyone  else  opposed  the 
review  of  the  trial,  he  was  a  pretorian  (meaning  a  mer- 
cenary soldier) ,  he  was  a  reactionist,  retrograde;  the  shouts 
of  "Long  live  the  army!"  "Death  to  the  Jews!"  and 
"Down  with  the  priests!"  were  heard  in  the  streets  and 
at  meetings.  Men  of  the  most  incongruous  spheres  of 
society  combined  or  contended  with  one  another. 

It  so  happened  that  some  of  the  curb  brokers  (cou- 
Lissiers)  who  brought  to  our  market  orders  from  Frank- 
fort, Berlin,  Madrid,  London,  Vienna,  and  Constantinople, 
were  foreigners.  Some  of  them  were  Jews.  It  is  easy 
to  guess  what  powerful  assistance  the  Dreyfus  affair 
brought  to  the  stockbrokers.  The  Coulisse  was  the 
victim.  The  nationalist  and  protectionist  papers  man- 
aged the  campaign,  reproached  some  of  the  opponents 
with  their  origin,  and  the  Parliament  resounded  with  the 


241 


National    M  o  n  et  ar  y     Commission 

saddest  discourses  ever  uttered  in  the  glorious  French 
rostrum. 

To-day  one  can  not  read  the  debates  without  expe- 
riencing deep  astonishment  at  the  wretchedness  of  the 
arguments  that  animated  all  this  debate,  which,  more- 
over, was  altogether  foreign  to  the  budget  discussion.  The 
author  of  the  amendment,  the  keystone  of  the  reorganiza- 
tion, M.  Fleury-Ravarin,  pleaded  that  there  had  been  tax 
frauds  in  the  open  market;0  to-day  it  seems  to  be  an 
established  fact  that  there  were  none. b  M.  Gauthier  de 
Clagny  called  to  account  the  foreigners  in  the  Coulisse.0 
But  nevertheless,  they  permitted  the  "  Rente  Coulisse"  to 
stay;  so  that,  as  far  as  public  credit  alone  is  concerned, 
there  are  Frenchmen  of  ancient  stock  who  negotiate 
Ottoman  bank  shares,  Turkish  rentes,  and  exterior  Span- 
ish. The  same  speaker,  concluding  from  the  particular  to 
the  general,  charged  the  Coulisse  with  the  emission  of  a 
security,  "La  Watana, "  which  he  called  a  swindle,  an 
emission  in  which  two  curb  brokers  were  interested. d  In 
the  Senate,  M.  de  Lamarzelle  reproached  the  Coulisse 
with  having  introduced  the  gold-mines  securities,6  but 
there  was  no  question  of  taking  away  from  the  Coulisse 
the  gold-mines  securities  in  which  it  was  dealing,  and  these 
securities  will  remain  there.  The  Minister  of  Finance,  M. 
Cochery,  carried  off  the  vote  in  the  Senate  by  maintaining 

a  Session  of  March  7,  1898;  Journal  Officiel  of  the  8th. 

&  Cote  de  la  Bourse  et  de  la  Banque;  annee  1898,  Nos.  141.  144,  255,  278. 

c  Session  of  March  8,  1898;  Journal  Officiel  of  March  9. 

&  Proceedings  were  instituted  against  the  issuers,  which  resulted  in  their 
being  fully  acquitted.  (Police  court  of  the  Seine,  eighth  chamber,  June 
21,  1901.  Le  Droit,  June  23,  1901.) 

«  Session  of  April  2,  1898;  Journal  Offlciel  of  the  5th. 


242 


History   and   Methods    of  the   Paris    Bourse 


that  on  two  occasions  the  curb  brokers  had  attempted  to 
depress  the  prices  of  French  rentes  and  Russian  rentes, 
both  of  which  were  dealt  in  only  on  the  "Parquet"  by 
the  stockbrokers. a  The  fact  is  substantially  incorrect. 

0  Here  are  the  very  words  uttered  by  M.  Cochery,  Minister  of  Finance. 
They  were  taken  from  the  Journal  Officiel  of  April  3,  1898,  in  the  report 
of  the  session  of  April  2 : 

"Just  now  a  singularly  painful  event  was  recalled  to  our  memory.  On 
two  occasions,  while  in  France  everyone  rejoiced  when  the  journey  of 
the  Russian  Emperor  in  France  and  the  journey  of  the  President  of  the 
Republic  .  .  ."  [Shouts  and  interruptions.] 

M.  DE  LAMARZELLE. — "But  this  is  quite  correct." 

The  MINISTER. — "Gentlemen,  I  wonder  at  these  protests.  [Speak,  speak.] 
I  am  bringing  with  me  particulars  for  the  information  of  the  Senate,  and 
with  no  thought  in  mind  but  the  public  welfare. 

"  I  say  that  on  two  occasions,  at  a  time  when  events  gave  France 
more  confidence  in  herself  and  in  the  future,  at  a  time,  consequently,  when 
it  seemed  that  an  upward  movement  in  the  securities  of  'the  two  allied 
nations  was  due,  there  occurred  in  the  market — not  in  the  official  mar- 
ket, but  in  the  open  market — tactics  calculated  to  cause  a  considerable 
decline." 

Well,  the  Russian  rentes  were  dealt  in  on  the  open  market  neither  in 
1896,  when  the  Russian  Emperor  visited  Paris,  nor  in  1897,  when  M.  Felix 
Faure  went  to  St.  Petersburg.  They  were  dealt  in  exclusively  on  the  offi- 
cial market,  so  that  it  was  materially  impossible  for  tactics  to  be  set  at 
work  in  the  open  market  against  the  Russian  rentes. 

As  to  the  French  rentes,  we  give  below  the  comparative  rates  in  the  offi- 
cial and  the  open  markets,  according  to  the  Official  Quotation  List  for  the 
former  and  according  to  the  "Cote  de  la  Bourse  et  de  la  Banque"  for  the 
latter. 

(a)  Prices  of  French  rentes,  3  per  cent,  from  October  3  to  October  8,  at 
the  time  of  the  Russian  Emperor's  trip  to  Paris: 


October  3 

Official  market 

101  .  80 

101   60 

101   65 

Open  market  

101.  78 

101  .  57 

101.  80 

101.  62 

October  4 

Bourse  closed. 

October  5  

Official  market  

101  .  57 

101  .  55 

101.  70 

101.  70 

Open  market 

101   53 

October  6  

Bourse  closed. 

October  7 

Official  market 

Open  market  _ 

101.  68 

101  .  72 

101.  50 

101  .  50 

October  8 

Official  market 

Open  market  

101.  68 

101.  73 

101  .  53 

101.  53 

243 


National    Monetary     Commission 

However,  he  permits  the  "Coulisse  des  rentes"  to 
remain  in  existence.  The  same  Minister  advanced  as  a  rea- 
son for  supporting  the  Fleury-Ravarin  amendment,  that 
the  Stockbroker's  Association  had  entered  a  complaint 
against  the  curb  brokers. a  Thus  he  desired  to  avoid  the 
disturbance  which  might  have  befallen  the  financial 
market,  and  he  fulfilled  the  expectations  of  the  stock- 
brokers before  they  obtained  such  fulfillment  by  legal 
means.  This  time  the  matter  was  taken  out  of  the 
court's  hands,  as  it  had  been  taken  out  of  the  Senate's. 
All  is  chaos  and  anarchy  in  that  discussion  and  in  those 
irregular  proceedings.  MM.  Lhopiteau,  Viviani,  and 
Ribot  called  the  Chamber's  attention  to  that  fact,&  and 
notably  M.  Ribot,  who,  however,  declared  himself  in 
favor  of  the  stockbrokers'  monopoly,  M.  Gouin,  in  the 
Senate,  president  of  the  commission  appointed  to  look 
into  the  Trarieux-Boulanger  proposition,  vainly  pro- 
tested. c  Inconsistency  in  arguments ;  illogicalness  in  solu- 

(&)  Prices  of  French  rentes,  3  per  cent,  from  August  23  to  27,  at  the  time 
of  President  Faure's  trip  to  Russia: 


Official  market 

104.  87 

104.  90 

104.  82 

104.  87 

Open  market            

104.  93 

104.  93 

104.  83 

104.  92 

Official  market 

104.  85 

104.  90 

104.  82 

104.  87 

Open  market                       - 

104.  88 

104.  93 

104.  83 

104.  90 

Official  market  

104.  85 

104.  92 

104.  85 

104.  90 

104.  87 

104.  93 

104.  87 

104.  90 

Official  market                   - 

104.  84 

104.  87 

104.  60 

104.  60 

Open  market      

104.  90 

104.  91 

104.  62 

104.  63 

Official  market 

104   75 

104.  77 

104.  60 

104.  65 

Open  market 

104.  78 

104.  78 

104.  60 

104.  70 

a  Senate,  session  of  April  2,  1898;  Journal  Officiel  of  the  3d. 
&  Chamber    of  Deputies,  session    of  March  7,   1898;  Journal  Officiel  of 
the  8th. 

c  Senate,  session  of  April  2,  1898;  Journal  Officiel  of  the  3d. 


244 


History    and   Methods    of  the   Paris    Bourse 

tions.  What  of  it?  The  vote  on  the  budget  of  1898, 
which  was  to  take  place  before  the  end  of  the  year  1897, 
is  away  behind  time;  elections  are  approaching.  There 
is  need  to  hurry.  Minds  are  disturbed.  Once  more  the 
Dreyfus  affair  is  in  full  swing.  The  ministry  obtains 
what  it  asked  for.a 

(108)  The  curb  brokers  resorted  to  libels  in  answering 
the  attacks  they  were  subjected  to  in  the  newspapers. 
But  the  discussion  gained  neither  in  broadness  nor  in 
theoretical  interest.  The  two  parties  fired  their  griev- 
ances at  each  other,  and  it  must  be  admitted  that  if  the 
Stockbrokers'  Association  did  not  deserve  victory,  the  cou- 
lisse party  deserved  defeat.  Hardly  had  the  law  of  1893 
permitted  them  to  deal  publicly  in  listed  securities  when 
the  curb  brokers  entirely  lost  sight  of  the  fact  that  that 
state  of  things  would  only — nay,  could  only — be  tempo- 
rary. To  trade,  to  buy,  or  to  sell — that  was  all  that 
concerned  them.  The  gold  mines  engrossed  their  atten- 
tion. They  lacked  entirely*  the  sense  of  professional 

a  The  Honorable  M.  Cochery,  who  presided  at  the  Congrds  International 
des  valeurs  mobilises  (International  Congress  of  Transferable  Securities) 
in  1900,  condescended  to  acknowledge  to  the  author  that  the  arguments 
brought  forward  in  favor  of  the  freedom  of  the  market  (in  the  session 
of  June  6  of  said  Congress)  were  mostly  new  to  him ;  that  it  was  a  mat- 
ter of  regret  for  him  that,  for  some  inexplicable  cause,  these  arguments 
had  never  come  to  his  notice;  and  that,  if  he  had  been  aware  of  them,  he 
would  have  hesitated  in  extolling  the  prevailing  system  in  its  totality. 
These  words  do  great  honor  to  the  Minister.  Moreover,  the  Honorable  M. 
Cochery  in  his  closing  speech  of  the  Congress — a  speech  bearing  the  stamp 
of  great  elevation  of  mind — made  plainly  known  the  emotion  he  had  expe- 
rienced during  the  session  devoted  to  the  inquiry  into  the  organization  of 
bourses:  "Relating  to  the  market  organization,  the  debate  at  one  time 
assumed  a  truly  passionate  aspect  ....  but  passionate  in  the  right 
way — the  passion  resulting  from  the  wish  to  protect  common  interests." 
[Loud  applause.]  Stenographic  report  of  the  Congress,  C.  I.  P.,  308, 
P.  Dupont,  printer. 


245 


National    M  o  n  et  ar  y     Commission 

orientation.  Many  looked  upon  their  profession  as  some 
sort  of  tolerated  condition,  to  cease  the  day  it  would 
suit  the  stockbrokers  to  have  it  cease.  They  had  no 
idea  of  a  natural  right  to  be  transformed  into  a  positive 
right,  and  it  was  the  lack  of  this  notion  that  caused 
their  reply  to  be  so  little  interesting.  "We  represent 
such  an  amount  of  taxes,  licenses,  such  a  number  of 
telegraphic  messages,  we  employ  so  many  clerks, "- 
this  was  the  level  to  which  the  discussion  rose,  unless 
once  in  a  while  there  happened  an  argument  "ad 
homines"  in  answer  to  those  aimed  at  them.  The  one 
who  evoked  an  economic  principle  was  called  a  theorist, 
a  transcendental  metaphysicist.  Moreover,  there  was  no 
discipline  on  the  Coulisse.  Its  president,  M.  Alphonse 
Lange,  who  died  shortly  afterwards,  undoubtedly  should 
be  given  credit  for  wanting  to  offer  energetic  resistance. 
Personally  very  wealthy,  he  might  have,  like  many 
others,  said  to  himself  that,  if  conquered,  the  defeat 
meant  but  little  to  his  own  personal  interests.  Yet  he 
put  up  a  really  good  fight,  but  he  was  little  adapted  for 
such  discussions;  moreover,  no  one  among  the  curb 
brokers — a  thing  unheard  of — seemed  prepared  for  them. 
Besides,  had  not  the  announcement  been  given  out  that 
twenty  new  offices  of  stockbrokers  were  to  be  created  ? a 
Many  of  the  curb  brokers  intended  to  be  candidates  for 
these  new  offices.  It  was,  therefore,  necessary  that  the 
opposition  of  the  crowd  should  not  be  too  fiery,  lest  all 
of  the  candidates  be  rejected;  and  these,  being  more  or 
less  clear-sighted,  stood  in  the  way  of  a  too  energetic 

a  The  Minister  of  Finance  confirmed  that  item  of  news  in  the  Chamber  of 
Deputies,  March  8,  1898,  Journal  Officiel  of  the  Qth. 


246 


History    and   Methods    of  the   Paris    Bourse 

action  for  the  defensive  or  the  offensive.  But  a  group 
of  professional  men,  whoever  they  may  be,  containing, 
in  spite  of  its  immense  resources,  such  elements  of 
weakness,  is  incontestably  destined  in  advance  to  defeat. 
Financiers .  make  the  great  mistake  of  not  sufficiently 
taking  into  account  that  moral  force  and  professional 
dignity  are  worth  more  than  gold.  However  strong  may 
have  been  the  cause  of  the  Coulisse,  its  advocates  failed 
in  their  efforts  on  its  behalf,  and  it  was  no  easy  matter 
to  champion  it  in  Parliament,  because  its  defenders  were 
badly  treated  in  certain  publications. 

Now,  if  the  curb  brokers  had  to  be  defeated — if,  as  a 
special  group,  they  deserved  the  defeat  they  had  expe- 
rienced— was  not  their  cause  superior  to,  did  it  not  go 
beyond,  the  individual  members;  were  there  not  sufficient 
grounds  to  watch  against  the  strengthening  of  the  mo- 
nopoly ;  was  it  not  necessary  to  beware  of  having  recourse 
to  surreptitious  means  in  proceeding  to  a  reorganization 
of  the  market ;  was  it  not  necessary  that  the  Bourse 
should  be  either  free  or  regulated? 

It  seems  that  the  act  of  reorganization  should  have 
been  prompted  by  considerations  superior  to  the  interests 
of  the  stockbrokers  or  of  the  curb  brokers.  At  any  rate, 
let  us  see  what  took  place  within  the  Coulisse  on  the 
day  following  the  reorganization. 

(109)  After  the  "reorganization,"  the  Coulisse  remained 
composed  of  the  following  elements: 

The  "coulisse  des  rentes"  (Coulisse  for  rentes)  remained 
the  same  as  before.  It  keeps  on  in  a  state  of  being 
tolerated. 


247 


National    Monetary     Commission 

The  ' ( coulisse  des  valeurs"  (Coulisse  for  securities)  does 
not  any  longer  exist  in  a  state  of  being  tolerated.  Curb 
brokers  deal  freely,  as  intermediaries  or  otherwise,  in 
securities  not  susceptible  of  being  quoted,  whether  these 
securities  be  such  that  the  stockbrokers  do  not  care  to 
quote,  or  such  that  they  are  not  allowed  to  quote.  In 
the  latter  category  are  found  the  foreign  securities,  in 
denominations  of  25  francs,  which  the  French  law  does 
not  permit  for  French  corporations.  (Law  of  August  i, 
1893;  decree  of  December  i,  1893.) 

Under  these  conditions,  a  number  of  bankers  who 
make  it  a  practice  to  deal  among  themselves  in  the  Paris 
market,  established  two  professional  syndicates,  under 
the  terms  of  the  law  of  March  21,  1884,  concerning  syn- 
dicates :  one  for  the  bankers  dealing  for  future  delivery 
(b  terme) ,  and  the  other  for  the  bankers  dealing  for  cash 
(au  comptant).  Of  course,  one  may  belong  to  the  pro- 
fession without  being  connected  with  either  of  the  syndi- 
cates. There  is  nothing  to  prevent  a  banker  from  pur- 
chasing certain  securities  from  another  banker,  whether 
he  belongs  to  a  syndicate  or  not,  but  members  of  syndicates 
constitute  groups  only  among  themselves. 

The  Coulisse  is  not  officially  known  under  that  name. 
The  professionals  on  the  bourse  who  are  not  stock- 
brokers (agents  de  change)  are  called  bankers  (banquiers). 
The  curb  brokers  (Coulisse  members)  in  rentes  form  the 
"groupe  des  Banquiers  en  Rentes  Francaises."  The 
groups  for  other  securities  are  formed  by  the  members 
of  the  "Syndicat  des  Banquiers  en  valeurs  au  comptant" 
(syndicate  of  bankers  dealing  in  securities  for  cash) ,  and 


History   and   Methods   of  the   Paris    Bourse 

of  the  "Syndicat  des  Banquiers  en  valeurs  a  terme"  (syn- 
dicate of  bankers  dealing  in  securities  for  future  delivery) . 
A  special  group  is  formed  by  the  "Union  des  Banquiers" 
(Bankers' Union),  which  deals  in  commercial  bills.  The 
"Union  des  Banquiers"  has  always  kept  out  of  the 
quarrel. 

(no)  Truly  it  would  be  judging  superficially,  to  con- 
clude from  the  above  that  conditions  are  satisfactory. 
The  condition  of  the  Coulisse  for  rentes  is  necessarily 
precarious.  To  be  tolerated  is  neither  a  prosperous  nor 
a  progressive  condition. 

As  to  the  Coulisse  for  securities,  according  to  the 
decision  of  the  Cour  de  cassation  of  June  i,  1885,°  as 
soon  as  a  security  is  admitted  to  the  Official  Quotation 
List,  the  dealings  in  the  same  become  an  attribute  of  the 
monopoly.  In  that  regard,  therefore,  there  is  yet  a  rela- 
tive condition  of  toleration.  The  same  applies,  in  a  strictly 
legal  aspect,  to  securities  concerning  which  an  agreement 
was  reached  in  1901  between  the  Stockbrokers'  Associa- 
tion and  the  bankers  dealing  in  securities  for  future 
delivery.  Finally,  as  to  foreign  securities  which  can  not 
be  officially  quoted,  because  their  denomination  is  inferior 
to  the  par  value  of  French  shares,  a  mere  reduction  of 
the  limit  fixed  by  French  lawmakers  would  result  in 
rendering  available  for  quotation  on  the  " Parquet"  the 
2 5 -franc  shares  of  foreign  corporations.  This  change  is 
eagerly  sought  by  the  Stockbrokers'  Association. 

(in)  As  to  the  stockbrokers'  monopoly  (monopole  des 
agents  de  change),  it  reigns  supreme,  as  sovereign  master, 
outside  the  restricted  sphere  in  which  the  Coulisse  oper- 

,  1885,  p.  257. 
249 


National    Monetary     Commission 

ates.  This  is  equitable  neither  from  the  standpoint  of 
public  justice,  nor  from  the  economic  point  of  view,  nor 
from  that  of  the  State's  interests. 

The  principles  of  public  justice,  belonging  to  the  natu- 
ral or  civil  order,  refer  to  the  rights  of  individuals.  They 
include  personal  liberty,  civil  equality — that  is  to  say, 
equality  before  the  law,  the  right  of  assemblage,  the  free- 
dom of  labor,  of  commerce,  and  of  industry.  Proclaimed 
by  the  Declaration  of  the  rights  of  man  and  of  the  citizen 
(Declaration  des  droits  de  Vhomme  et  du  citoyen),  on  August 
26,  1789,  they  are  to-day  the  foundation  of  French  public 
rights,  and  have  been  mentioned  either  explicitly  or  im- 
plicitly in  all  constitutions: 

"Of  all  monopolies  intrusted  to  ministerial  officers," 
said  M.  Ducrocq0  "there  are  few  which  are  more  dis- 
puted or  more  disputable,  from  the  standpoint  of  prin- 
ciples, than  the  stockbrokers'  monopoly.  Their  office, 
indeed,  is  one  of  those  in  which  the  character  of  public 
office  has  the  least  share,  and  in  which,  on  the  contrary, 
the  professional  and  even  the  commercial  character 
occupies  the  most  important  place.  The  negotiating  of 
bourse  securities,  in  return  for  a  compensation,  is  no 
more  a  public  function  than  the  selling  of  any  other 
kind  of  merchandise 

"We  can  conceive  of  no  serious  reason,  drawn  from  the 
interests  of  public  credit,  to  maintain  the  market  for 
bourse  securities  within  the  hands  of  a  close  corporation. 
This  dealing  in  bourse  securities  is  indeed  the  essential  part 
of  the  vocation  of  the  stockbroker;  his  other  duties  are 

«  Cours  de  droit  administratif  et  de  legislation  jranqaise  des  finances  T.  Ill, 
No.  4,  215. 


250 


History    and   Methods   of  the   Paris    Bourse 

mere  accessories.  Well,  there  is  no  doubt  that,  in  order  to 
give  to  the  trading  in  securities  the  moral  and  material 
safety  which  is  indispensable  for  public  credit,  there  is  no 
necessity  to  turn  it,  contrary  to  its  nature,  into  a  public 
function.  It  is  sufficient  to  regulate  and  to  control  the 
profession,  which  thus  becomes  reconciled,  within  the 
measure  demanded  by  public  interest,  with  the  principle 
of  freedom  of  labor  and  commerce. 

"  The  other  duties  of  stockbrokers — the  verifying  of  quo- 
tations and  the  certifying  of  transfers — are  accessories  of 
which  the  stockbrokers  might  be  relieved,  so  as  to  remain 
invested  only  with  their  principal  and  essential  role — the 
role  of  dealers  in  securities.  There  would  be  no  more  pre- 
text for  monopoly.  A  few  real  officials  could  be  intrusted 
with  the  duty  of  certifying  transfers  and  drawing  up  the 
quotation  lists.  At  any  rate,  if,  instead  of  proclaiming  the 
markets  absolutely  free,  the  law  were  to  suppress  the 
monopoly,  and  to  regulate  the  profession  by  the  indemnity 
system  applied  to  merchandise  brokers  by  the  law  of  July 
1 8,  1866  (No.  1208) ,  could  not  then  the  new  syndical  cham- 
ber continue  to  provide  for  those  two  features,  in  a  wide- 
open  corporation,  under  requirements  of  legal  qualifica- 
tions, morality,  and  solidarity?  The  fixed  time  and  place 
for  holding  the  Bourse,  its  publicity,  the  trading  in 
a  loud  voice,  are  such  sure  bases  of  genuineness  for  estab- 
lishing the  quotation  list  that  the  regulation  of  the  pro- 
fession should  certainly  suffice  to  allow  it  to  continue 
attending  to  the  matter  by  itself.  Does  not  the  syndical 
chamber  of  the  stockbrokers  (chambre  syndicate  des 
agents  de  change)  content  itself  with  merely  registering 
the  quotations  of  the  prices  set  up  by  the  exchange  and 


251 


National    Monetary     Commission 

metal  brokers,  though  legally  it  should  be  prepared  by 
the  syndical  chamber  itself?  It  is  therefore  not  neces- 
sary, for  the  verification  of  quotations,  that  there  exist 
'  agents  de  change,'  holders  of  ministerial  offices. 

"  France  is  about  the  only  country  whose  financial  mar- 
ket is  in  the  hands  of  intermediaries  who  are,  in  fact,  the 
owners  of  their  offices,  invested  with  absolute  monopoly.. 
There  are  even  countries  where  the  freedom  of  the  market 
is  complete,  as  in  England,  where  the  Bourse,  called  the 
Stock  Exchange,  is  a  private  institution,  elective  and 
subject  to  its  own  by-laws;  in  the  United  States,  where 
the  organization  is  the  same;  in  Belgium,  since  the  law  of 
December  20,  1867,  which  proclaimed  the  free  exercising 
of  the  functions  of  merchandise  brokers  and  stockbrokers ; 
in  most  of  the  Swiss  Cantons,  excepting,  however,  Basle, 
Geneva,  and  Zurich,  which  have  monopolies;  and  in  the 
South  American  Republics  (Argentine  Republic,  Brazil, 
and  Paraguay) .  In  all  other  countries,  the  financial  mar- 
ket system  is  built  up  on  the  principle  we  recommend, 
of  the  freedom  of  the  profession  combined  with  its  regu- 
lation. Such  are  the  legal  provisions  of  the  German 
Empire,  Austro- Hungary,  Russia,  Italy,  Spain,  Portugal, 
Holland,  and  the  Scandinavian  States." 

MM.  Lyon-Caen  and  Renault  point  out  with  the  same 
clearness,  that  mediation  in  negotiating  securities  possesses 
in  itself  no  attribute  of  a  public  function.  We  quote: ° 

"It  should  be  noticed  that  in  1866  nobody  asked  that 
the  stockbrokers'  monopoly  be  suppressed.  Sundry  rea- 
sons have  often  been  brought  forward  in  favor  of  its 
being  maintained.  Their  part  is  not  limited  to  trading 

a  Trait^  de  Droit  Commercial,  T.1V,  No.  1035. 
252 


History    and    Methods    of  the    Paris    Bourse 

in  bourse  securities ;  they  guarantee  the  identity  of  parties 
and  the  genuineness  of  signatures  for  the  transfer  of  gov- 
ernment and  other  securities;  they  are  necessarily,  for 
a  certain  time,  depositaries  of  important  sums  and 
numerous  securities ;  every  day  they  verify  the  quotations 
of  securities,  especially  government  securities.  Thanks  to 
the  stockbrokers '  monopoly,  the  Treasury  enjoys  perfect 
security  as  to  the  transfers  involving  its  responsibility; 
transactions  are  carried  out  with  great  rapidity,  and  the 
interest  of  inexperienced  people,  who  have  to  hand  in 
their  securities  or  their  money,  is  protected.  Such  is  the 
summary  of  the  reasons  given  by  the  Government  in 
the  explanatory  statement  of  the  law  of  July  18,  1866. 
(J.  Bozerian.  De  V Institution  des  Agents  de  Change.) 
These  arguments  advanced  in  favor  of  the  monopoly  held 
by  the  stockbrokers  are  not  decisive.  Mediation  in  nego- 
tiating securities  has  nothing  in  itself  constituting  a  public 
function.  Moreover,  one  could  conceive  that  freedom  was 
allowed  in  this  matter,  and  that,  without  monopoly,  meas- 
ures had  been  taken  for  the  verification  of  quotations  and 
for  the  avoidance  of  the  worst  abuses.  Besides,  there  are 
many  countries  where  there  is  no  monopoly  either  for  the 
brokerage  in  merchandise,  insurance,  and  freight,  or  for 
the  mediation  in  negotiating  securities,  and  yet  the  free- 
dom does  not  appear  to  stir  up  any  complaints.  See, 
especially,  the  Belgian  law  of  December  30,  1867;  the 
regulation  attached  to  decree  of  December  14,  1882,  given 
out  for  the  execution  of  the  Italian  commercial  code  of 
1882;  and  the  Hungarian  code  (art.  524  et  seq.)  The 
German  commercial  code  (art.  66  et  seq.)  authorizes  official 
brokers,  leaving  to  private  individuals  the  right  to  do 


353 


National     M  o  n  et  ar  y     Commission 

brokerage  as  private  brokers.  This  code  reserves  the 
right  for  each  State  to  establish  a  monopoly  for  the  ben- 
efit of  official  brokers  (art.  84). 

"  None  of  the  States,  however,  has  availed  itself  of  this 
privilege,  while  Bavaria,  Wurttemberg,  and  Hamburg  have 
each  abolished  the  monopoly  there  existing.  In  Bremen 
(1867)  and  in  Hamburg  (1871)  the  official  brokers  have 
been  suppressed.  "In  Austria  the  law  of  April  i,  1875, 
has  sanctioned  the  monopoly;  but  the  law  has  shown 
no  results.  The  private  brokers  remain  in  fact,  and 
operate  as  commission  men  with  the  brokers  themselves. 
(V.  Endeman,  Handbuch  des  Deutschen  Handelsrechts,  III, 
pp.  135  and  137.)" 

(112)  Leaving  now  the  critical  analysis  of  jurists,  and 
passing  to  the  examination  of  the  question  of  the  stock- 
brokers' monopoly  from  the  economic  standpoint,  we  can 
not  but  condemn  it  in  the  most  unequivocal  terms. 

Let  us  observe,  however,  that  public  justice  and  politi- 
cal economy  have  such  affinities  in  many  respects  that, 
when  the  economic  principles  have  passed  into  the  do- 
main of  law,  it  is  impossible  to  distinguish  between  the 
considerations  depending  upon  the  one  or  the  other 
science.  Moral  and  political  sciences,  moreover,  are  not 
separated  by  impenetrable  walls,  and  the  divisions  set  up 
by  men  for  the  accommodation  of  their  reasoning  in 
no  way  interfere  with  the  community  of  principles  on 
which  they  depend.  Thus  we  may  say  that  the  consid- 
erations of  public  justice  we  have  just  expounded  serve  as 
an  introduction  to  those  which  are  to  follow. 

The  modern  doctrine  of  monopoly  does  not  derive  it 
any  longer  from  a  royal  or  state  prerogative.  The  right 


254 


History   and   Methods   of  the   Paris    Bourse 

to  labor  belongs  to  all.  Certain  lines  of  work  are  subject 
to  special  conditions  in  France — the  practice  of  medicine, 
or  the  practice  of  pharmacy,  for  instance;  but  inquir- 
ing into  the  conditions  for  recruiting  professional  men 
for  these  practices,  we  see  that  there  is  no  monop- 
oly on  them.  All  those  who  meet  certain  conditions 
may  be  physicians  or  pharmacists.  Monopoly  exists 
when  the  State  exercises  certain  public  services,  or  car- 
ries on  a  certain  industry,  or  again,  when  it  deprives  cer- 
tain people  of  the  right  to  labor,  granting  it  to  others  in 
consideration  of  a  fee  or  gratuitously.  In  the  first  case 
it  is  a  public  monopoly,  in  the  second  it  is  a  private 
monopoly.  Well,  the  stockbrokers'  monopoly  is  exer- 
cised by  ministerial  officers,  not  for  account  of  the  State, 
but  for  their  own  account.  This  is  a  private  monopoly, 
to  which  all  economists  are  strongly  opposed. 

"Like  all  monopolies,  but  more  justly  than  many 
others,  the  stockbrokers'  monopoly  is  furiously  attacked. 
It  may  be  impossible  to  give  decisive  reasons  in  its  favor, 
though  in  the  last  resort  it  may  be  acknowledged  that 
the  Bourse  intermediaries  should  be  bound  to  furnish 
personal  guarantees." 

Thus  expressed  himself  M.  Paul  Cauwes,a  professor  in 
the  Law  Faculty  of  the  Paris  University. 

M.  Courcel-Seneuil  expressed  himself  as  follows:6 

"The  monopoly,  giving  rise  to  exceptional  profits, 
creates  an  entirely  artificial  property,  built  up  at  the 
public  expense  and  for  the  benefit  of  the  first  holders,  a 
property  acquired  without  labor,  growing  without  labor 

a  Precis  d*  Economic  Politique,  T.  i,  p.  648. 

&  Trait£  d'Economie  Politiqiie,  1801,  T.  2,  p.  125. 

90312° — 10 17  255 


National     Monetary     Commissio 


n 


with  the  increase  in  population  and  general  wealth,  and 
having  no  justification." 

At  the  congress  of  1887  of  the  Association  Franfaise 
pour  I'avancement  des  sciences  M.  Arthur  Raffalovich  ex- 
pressed himself  as  follows,  in  a  lecture  on  the  Paris 
Bourse:0  "In  spite  of  the  increasing  value  of  transferable 
wealth  of  the  transactions  effected  daily  at  the  Bourse, 
France  presents  the  strange  phenomenon  of  a  legislation 
relatively  stationary,  of  an  old-fashioned  regulation, 
which  is  not  in  keeping  with  the  requirements  of  the 
times  *  *  *.  The  monopoly  of  the  stockbrokers 
seems  to  me  doomed  to  disappear;  it  does  not  exist  in 
any  of  the  great  European  markets." 

The  Traite  d' Economic  Politique  of  M.  Joseph  Garnier,6 
after  having  expressed  the  view  that  (No.  191)  "all  arti- 
ficial monopolies  in  favor  of  individuals"  are  contrary 
to  justice,  detrimental  to  production,  and  have  a  tend- 
ency to  assume  the  character  of  "abusive  and  iniqui- 
tous" privilege,  declares  that  those  are  the  vestiges  of 
the  guild  system  that  have  to  be  eradicated.  The  au- 
thor expressly  aims  at  the  ministerial  offices  of  stock- 
brokers— after  having  shown  that  in  March,  1858,  the 
"Butchers'  Guild "  (corporation)  had  been  suppressed,  in 
1863  the  "Bakers'  Guild,"  and  in  1866  the  "Commercial 
Brokers'  Guild."  (Footnote  under  No.  196.) 

It  would  not  be  difficult,  however,  to  find  also  a  good 
many  complaints  in  the  literature  of  the  time  coming 
from  those  whose  privileges  were  to  be  suppressed. — "If 
the  butchers  and  bakers  were  no  longer  constitute/!  as  a 

a  Comptes  Rendus  de  1887,  Masson,  editor,  p.  984. 

&  Edition  of  1889,  brought  up  to  date  by  M.  Andr6  Liesse. 


256 


History   and   Methods   of  the   Paris    Bourse 

privileged  corporation,  everybody  was  to  die  of  hunger!" — 
"As  for  free  brokerage,  it  would  be  even  a  much  greater 
calamity.  A  lot  of  vagabonds  would  undertake  to  work 
as  brokers,  and  would  prostitute  commerce." — The  legisla- 
ture of  1866  took  no  notice  of  these  arguments,  and  nobody 
wants  monopoly  any  longer.  It  was,  moreover,  what  had 
already  happened  a  century  before.  When,  in  1776,  all 
corporations  were  threatened,  the  six  principal  trades 
unions  addressed  petitions  and  requests,  and  explained 
that  wardenships,  masterships,  and  guilds  secured  for  con- 
sumers integrity  in  contracts  and  quality  in  merchandise. 
The  arguments  in  favor  of  the  "agents  de  change"  are 
exactly  the  same  as  those  of  the  guilds  of  the  seventeenth 
century  and  of  the  holders  of  privilege  of  1866. 

The  Societe  d'Economie  Politique  in  1859"  discussed 
the  monopoly  of  stockbrokers.  MM.  Reybaud,  Wolowski, 
Michel  Chevalier,  Courcelle-Seneuil,  P.  Coq,  Courtois,  Du- 
puit,  de  Parieu,  and  J.  Gamier  took  part  in  the  dis- 
cussion, which  terminated  in  condemning  the  monopoly. 
In  1893  the  same  discussion  presented  itself  and  con- 
cluded in  the  same  way.  The  following  took  part  in  the 
discussion:  MM.  Courtois,  Brandts,  and  Alfred  Neymarck. 
The  latter  expressed  himself  energetically  against  the 
monopoly  of  stockbrokers,  and  M.  Gide  declared  "the 
institution  as  entirely  undeserving  of  interest. " 6  In  1 898, c 
right  before  the  "Reorganization,"  the  Societe  d'Economie 
Politique  expressed  itself  again  energetically  against  the 
monopoly  of  stockbrokers.  Only  M.  Manchez  upheld  it; 

^Journal  des  Economistes,  April  15,  1859. 
b  Journal  des  Economistes,  April  15,  1893. 
c  Journal  des  Economistes,  June  15,  1898 


257 


National    Monetary     Commission 

9 

but  those  who  spoke  against  it  were  MM.  de  Mont- 
planet,  J.  Siegfried,  Neymarck,  Emmanuel  Vidal,  and 
Frederic  Passy.  The  latter,  who  closed  the  debate, 
expressed  the  opinion  that  the  monopoly,  when  held  up 
as  the  means  of  guaranteeing  the  genuineness  of  quota- 
tions, carried  in  itself  the  denial  of  such  genuineness. 
The  Paris  Chamber  of  Commerce  expressed  an  opinion 
unfavorable  to  the  stockbrokers'  monopoly,0  and  the 
Tribunal  de  commerce  de  la  Seine,  when  asked  for  advice 
concerning  the  expediency  of  creating  new  offices  in 
completing  the  "reorganization"  scheme,  declared  itself 
against  the  measure.6  So  we  see,  it  is  not  alone  the 
economists  who  are  opposed  to  the  monopoly,  but  also 
the  business  men,  who  every  day  struggle  with  realities. 

It  has  often  been  claimed  that  the  stockbrokers',  mo- 
nopoly was  necessary  for  the  welfare  of  the  national 
credit.  But  facts  singularly  deny  that  assertion.  Why 
was  it  necessary  in  1898,  that,  simultaneously  with  the 
upholding  of  the  usefulness  of  bolstering  up  the  stock- 
brokers' privilege  by  the  Honorable  M.  Cochery,  he  should 
undertake  to  tolerate  the  existence  of  the  Coulisse,  plac- 
ing it,  in  fact,  under  the  exclusive  supervision  of  the 
Stockbrokers'  Association  (Compagnie  des  Agents  de 
Change)  ?  No  argument  could  be  more  flatly  contradicted. 

Moreover,  how  could  the  "agents  de  change"  support 
the  country's  rentes?  It  should  be  borne  in  mind  that 
in  the  countries  whose  rentes  enjoy  the  best  reputation 
among  the  investing  public  in  London,  Berlin,  and  New 
York,  there  are  no  ministerial  officers  for  the  negotiation 

a  May  14,  1898,  Cote  de  la  Bourse  et  de  la  Banque  of  May  17. 
&  May  25,  1898,  Cote  de  la  Bourse  et  de  la  Banque  of  May  26. 


258 


History   and   Methods   of  the   Paris    Bourse 

of  securities.  Moreover,  the  stockbrokers  in  France  can 
not  undertake  bourse  operations  for  their  own  account, 
according  to  article  85  of  the  Code  de  Commerce.  But 
one  can  uphold  the  price  of  a  merchandise  or  a  security 
only  by  buying  it  and  by  meeting  repeated  and  persistent 
offers  by  bids  of  equal  force,  able  to  counterbalance  them 
and  force  the  short  sellers  to  cover.  We  have  seen  before 
that,  on  the  contrary,  the  French  national  credit  was  built 
up  on  the  freedom  of  transactions. 

Some  imagine  that  to  be  admitted  to  the  official  quota- 
tion list  is  a  guarantee  to  the  public  of  the  intrinsic  value 
of  the  enterprise  the  securities  of  which  are  quoted. 
This  is  erroneous.  Public  savings  derive  no  benefit  of 
increased  safety  from  the  stockbrokers'  monopoly.  This 
is  no  reproach  to  monopoly.  It  essentially  could  not  be 
otherwise. 

Below  we  cite  the  opinion  on  that  subject  given  in 
1875  by  the  Syndic  of  the  stockbrokers,  Moreau,  at  the 
General  Assembly  of  his  colleagues.05 

"It  is  to  be  much  regretted  that  our  duties  are  so 
little  understood  by  the  public,  that  some  of  our  pro- 
ceedings are  charged  with  a  function  they  do  not  possess, 
and  which  they  never  did  possess.  Often  some  people 
wrongfully  imagine  that  the  admission  of  a  security  on 
the  official  quotation  list,  is  a  kind  of  indorsement  given 
that  security,  a  testimonial  in  its  favor,  an  introduction 
by  the  syndical  chamber. 

' '  Nothing  is  further  from  the  truth. 

"The  quotation  list  is  simply  the  verification  of  the 
prices  at  which  a  security  has  been  dealt  in.  Whenever  a 

a  Semaine  Financidre  of  February  7,  1875,  p.  137. 
259 


National     Monetary     Commission 

certain  number  of  capitalists  choose  to  effect  a  sufficiently 
large  number  of  transactions  in  any  given  enterprise, 
whether  good  or  bad,  it  is  for  them,  and  not  for  us,  that 
the  delicate  task  of  price-fixing  is  reserved;  and,  if  it  is 
done  within  the  conditions  exacted  by  the  revenue  laws, 
and  allowing  sufficient  competition  and  publicity,  we  can 
not  refuse  to  serve  them,  since  we  are  in  possession  of  a 
monopoly,  and  we  are  bound  to  execute  orders." 

Existing  theory  is  in  unanimous  agreement  with  this 
opinion. 

"It  should  be  noticed,"  said  Mollot,a  "that,  although 
the  Syndical  Chamber  is  intrusted  by  law  with  the  duty 
of  verifying  quotations  of  securities,  it  can  not  guarantee 
their  value.  It  is  not  called  upon  to  inquire  into  their 
merit,  whether  as  to  their  form  or  as  to  the  solvency  of 
the  debtors.  The  value  of  the  securities  may  vary  ad 
infinitum,  without  ever  making  the  Chamber  responsible 
for  it.  It  is  for  those  who  operate  to  investigate  the 
nature  and  soundness  of  enterprises.  They  buy  at  their 
own  risk." 

In  his  Dictionnaire  de  Droit  Commercial*  M.  Ruben  de 
Couder  expresses  himself  as  follows: 

"The  Syndical  Chamber  does  not  guarantee  the  value 
of  the  securities  the  quotations  of  which  it  verifies.  It 
is  for  those  who  operate  to  satisfy  themselves  as  to  their 
soundness." 

In  the  "Dictionnaire  universel  de  la  Bourse  et  de  la 
Banque"  c  we  read:  "It  is  not  correct  to  imagine  that 

a  Bourses  de  Commerce,  No.  479. 

b  Under  ''Agents  de  change." 

c  Uncompleted  work  published  under  the  management  of  M.  J.  Boze"rian 
under  "Admission  a  la  cote"  (Comite  des  Publications  scientifiques  et  indus- 
trielles,  5,  cite  Palgalle). 

260 


History   and   Methods   of  the   Paris    Bourse 

admission  of  a  security  to  the  quotation  list  is  some  sort 
of  sanction  given  to  that  security,  like  a  testimonial  in 
its  favor,  a  reference  of  the  Syndical  Chamber." 

M.  Buchere  °  limits  the  responsibility  concerning  the 
admission  to  the  quotation  list,  to  the  case  when  securities 
have  not  been  regularly  issued.  This  is  common  law; 
this  is  not  the  principle  of  a  special  responsibility  per- 
taining to  the  stockbrokers.  No  matter  whether  one  is 
the  issuer  of  the  stock,  or  only  aider  and  abettor,  he  incurs 
the  same  responsibility. 

M.  Abel  Valdmann  is  explicit  on  that  point: 

"The  statement  of  all  the  qualifications  as  to  form, 
making  a  security  fit  to  be  quoted  officially,  does  not 
involve — in  fact,  has  no  connection  with — the  statement 
of  its  merchantable  qualifications;  that  is  to  say,  of  those 
relating  to  the  intrinsic  value  of  the  security."6 

And  later  the  same  author  adds: 

"There  has  never  been  found,  and  there  never  will  be 
found,  a  court  that  will  countenance  the  absurdity,  that 
the  admission  to  the  quotation  list  guarantees  to  the 
buyer  that  he  is  making  a  good  investment.  Well  might 
we  ask  what  guaranty  the  syndical  chambers  would  then 
give  to  the  seller,  who  is  likewise  one  of  the  contracting 
parties  in  every  trade,  and  quite  as  interested  as  the 
purchaser."0 

To  be  sure,  no  foreign  security  can  be  admitted  on  the 
quotation  list  without  the  positive  permission  of  the  Min- 
ister of  Finance,  but  this  in  no  wise  renders  the  Minister 
liable. 

a  Traite  des  valeurs  mobilieres,  No.  1108. 
6  La  profession  d' Agent  de  Change,  No.  313. 
c  No.  329. 

261 


National    Monetary     Commissio 


n 


Since  1837  the  Chambre  Syndicate  des  agents  de  change 
has  asked  the  Minister  of  Finance  to  undertake  to  give  an 
opinion  in  last  resort  on  the  admissions  of  new  securities 
to  the  quotation  list.  The  Minister,  M.  Lacave-I/aplagne, 
declined  all  responsibility,  acknowledging,  nevertheless, 
that  the  responsibility  should  not  fall  upon  the  Syndical 
Chamber.0  Never  since  has  any  minister  accepted  such 
responsibility.  By  the  way,  the  right  the  Minister  of 
Finance  has  to  forbid  a  foreign  security  from  being  ad- 
mitted to  the  quotation  list  is  independent  of  the 
question  of  monopoly,  and  that  right  may  be  maintained 
whatever  be  the  regime  of  the  financial  market. 

The  actual  financial  power  of  the  Paris  stockbrokers 
is  put  forward  as  an  argument,  and  it  is  affirmed  that  our 
financial  market  is  the  first  in  the  world.  In  our  opin- 
ion, even  granting  that  this  is  true,  which  is  far  from 
having  been  proven,  the  cause  is  confounded  with  the 
effect.  When  a  country,  owing  to  its  geographical  loca- 
tion, its  climate,  and  the  character  of  its  inhabitants,  pos- 
sesses numerous  natural  riches,  and  even  moral  riches, 
they  cooperate  in  increasing  its  wealth;  when  it  has  the 
advantage  of  certain  political  and  economic  conditions, 
when  it  enjoys  a  monetary  and  commercial  organization 
which  promotes,  instead  of  paralyzing,  human  activity 
in  most  of  its  manifestations,  then  that  country  is  rich 
and  deserves  to  be  rich.  And  it  may  then  happen  that 
some  organization,  defective  in  itself,  and  the  source  of 
manifold  vexations,  is  nevertheless  prosperous,  as  much 
on  account  of  certain  facts  of  adaptation  as  because  it 

a  Dictionnaire  universel  de  Bourse  et  de  Banque,  under  "Admission  b,  la 
Cote.1' 


262 


History   and   Methods   of  the  Paris    Bourse 

unavoidably  lies  within  the  reach  of  the  rays  of  national 
wealth.  It  reflects  that  wealth.  But  the  Paris  Bourse 
does  not  owe  its  prosperity  to  its  organization.  Seventy 
ministerial  appointees  intrusted  with  the  negotiation  of  1 30 
billions  of  transferable  securities  are  powerful  personali- 
ties. They  would  be  more  powerful  if  they  were  but  35. 
They  would  be  more  powerful  if  there  were  but  20  of 
them,  or  10  or  5,  or  even  i — if  there  were  in  the  market 
but  i  autocrat,  a  single  arbiter  of  securities,  centralizing 
bids  and  offers,  and  the  king  of  the  Bourse,  just  as  we  see 
in  America  an  oil  king  and  a  steel  king. .  In  such  a  case 
the  soundness  of  a  market  is  more  seeming  than  real.  If 
that  system  had  been  applied  to  provisions  and  merchan- 
dise, infinitely  more  necessary  for  consumption  than 
rentes  or  shares  in  companies,  the  market  for  wine, 
bread,  and  meat,  appropriated  by  a  few  barons,  might, 
perhaps,  be  stupendously  high,  but  in  this  respect  experi- 
ence speaks  in  favor  of  freedom  of  trade  only.  It  seems 
therefore  necessary  that  public  and  private  credit  should 
enjoy  the  benefit  of  an  organization  more  pliable  and  more 
in  harmony  with  the  general  condition  of  a  country's 
commerce.  Let  us  therefore  beware  of  mistaking  the 
appearance  of  force  for  force  itself — a  deception  that 
should  impress  us  no  more  than  the  sight  of  the  effigies 
of  iron-clad  warriors,  standing  on  rich  trappings  in  a  mili- 
tary museum.  If  our  financial  market  were  opened  to 
all  who  have  funds  and  understand  the  profession,  it 
would  be  stronger  still.  If  the  market's  favorable  situa- 
tion were  distributed  among  several  hundred  individ- 
uals, the  division  of  risks  would  render  the  market  more 
stable,  competition  would  secure  for  our  market  the 

263 


National    Monetary     Commission 

desired  elasticity,  and,  if  wanted,  regulation  under  the 
supervision  of  the  Minister  of  Finance  would  create  a 
condition  half  way  between  unlimited  freedom,  which, 
with  more  or  less  reason,  scares  so  many  people,  and 
monopoly,  which  is  an  old  outfit,  in  no  way  suiting  our 
customs,  and  disturbing  the  harmony  of  our  laws  without 
rendering  the  services  expected  from  it. 

As  another  argument  in  favor  of  a  monopolized  market 
the  joint  liability  of  the  brokers  is  pleaded.  It  is  indis- 
putable that  when  the  public  is  told:  "The  agents  de 
change  are  conjointly  liable,"  it  receives  a  pledge  on 
which  it  rests  its  faith,  and  yet  it  is  certain  that  the  joint 
liability  of  the  stockbrokers  is  perhaps  the  most  detestable 
of  all  measures  passed  in  1898. 

It  must  be  admitted  that  M.  Cochery,  the  Minister  of 
Finance,  energetically  contested  the  measure  of  the  stock- 
brokers' joint  liability.  He  called  attention  to  the  fact 
that  the  result  would  be  to  weaken  in  the  stockbroker 
the  care  for  his  personal  responsibility. 

Then,  yielding  to  the  objections  of  some  deputies,  who 
disliked  to  strengthen  the  monopoly  without  some  redeem- 
ing features,  M.  Cochery  inserted  in  his  decree  of  June  29 
a  provision  establishing  the  joint  liability  of  stockbrokers, 
in  a  way  not  incontestably  legal,  for  again  it  ,m,ay  seem 
strange  that  a  decree  is  made  to  do  the  service  of  a  law. 

M.  Cochery  was  apparently  correct  as  far  as  the  stock- 
broker in  normal  times  is  concerned;  but  events  have 
demonstrated  the  defects  of  joint  liability  in  times  of  finan- 
cial panics;  in  such  times  it  causes  a  real  suspension  of 
the  market.  (February,  1904.) 


264 


History   and   Methods   of  the   Paris    Bourse 

We  find,  then,  two  defects  of  the  joint  liability  when  we 
examine  its  effects  upon  the  stockbroker. 

But  is  the  joint  liability  useful  so  far  as  the  public  is 
concerned?  This  is  another  side  of  the  question  of  joint 
liability. 

The  customers  of  stockbrokers  are  divided  into  three 
categories:  Givers  of  cash  orders,  speculators,  and  invest- 
ors in  continuations  (reporteurs) . 

Those  giving  orders  for  cash  have  no  use  for  the  stock- 
brokers' joint  liability.  The  transaction  for  cash  in- 
cludes, so  to  speak,  no  serious  risk  for  the  customer.  In- 
deed, in  giving  an  order,  he  deposits  a  small  cover.  A  few 
days  later  he  is  informed  that  the  securities  are  at  his 
disposal,  or  that  he  may  bring  the  securities  sold.  He 
calls,  settles,  and  leaves  either  with  the  cash  or  with  the 
securities.  However,  not  all  operations  have  that  imme- 
diately interchangeable  character.  But,  as  a  matter  of 
fact,  the  risk,  independently  of  the  joint  liability,  is  re- 
duced to  a  minimum.  Should  that  minimum  be  yet  too 
high,  it  would  not  be  difficult  in  a  proper  system  of 
bourse  organization  to  endeavor  to  prefer  certain  creditors, 
without  having  to  resort  to  such  an  empirical  means  as 
brokers'  joint  liability. 

Let  us  pafss  to  the  speculators.  The  most  interesting 
are  those  who  purchase  for  future  delivery  to  take  up 
securities,  or  who  sell  for  future  delivery  to  deliver.  But 
the  settlement  of  these  transactions  is  made  at  liquida- 
tion ;  that  is,  the  moment  when  the  settlement  for  cash  is 
effected,  money  against  securities,  securities  against  cash, 
within  a  very  short  time. 

We  can  refer  these  operations  to  transactions  for  cash. 


265 


National    Monetary     Commission 

Now,  all  these  transactions  for  cash  or  for  future  deliv- 
ery which  we  have  considered  thus  far  are  ordinary  com- 
mercial transactions,  such  as  are  customary  for  wheat, 
oil,  iron,  wool,  and  other  merchandise.  These,  conse- 
quently, the  lawmaker  protects  neither  through  monop- 
oly nor  through  joint  liability.  We  are  thus  able  to 
say  that  it  is  not  in  pursuance  of  reasons  applying  to 
commerce  in  general  that  the  stockbrokers'  joint  liability 
was  established.  It  is  in  view  of  conditions  peculiar  to 
the  profession.  Each  stockbroker  has  a  considerable 
following  of  customers  trading  for  future  delivery,  who 
settle  their  transactions  by  paying  the  differences.  It 
is  even  that  class  of  customers  which  is  most  prized ;  it  is 
the  most  profitable  class.  It  is  for  their  benefit  and  for 
the  benefit  of  "contangoers"  (reporteurs)  that  the  joint 
liability  was  established. 

Speculators  speculate  either  for  a  rise  (sont  places  d  la 
hausse),  in  which  case  they  are  buyers,  or  for  a  fall  (sont 
d  la  baisse),  in  which  case  they  sell  short  (sont  vendeurs  d 
decouvert) . 

The  joint  liability  is  therefore  a  measure  which  aims 
to  make  the  stockbrokers  liable  for  the  defaults  of  one 
or  more  of  them  in  times  of  panics;  that  is  to  say,  when 
there  is  a  general  decline  in  the  value  of  securities. 

Who  are  the  creditors  of  the  stockbrokers  at  such 
times?  Not  the  bulls  (speculateurs  d  la  hausse;  they  are 
the  debtors  of  the  stockbrokers.  It  is  the  bears  (specula- 
teurs  d  la  baisse)  who  are  the  creditors.  They  are  the 
ones  who  have  the  benefit  of  the  joint  liability.  Can 
anything  more  illogical  be  imagined?  The  main  effect  of 
the  joint  liability  is  to  protect  the  speculator  for  a  fall, 


266 


History   and   Methods   of  the   Paris    Bourse 

whom  the  lawmaker  of  the  year  III  punished  with  im- 
prisonment, forfeiture  of  property,  and  exposure  to  pub- 
lic view  with  a  sign  on  his  breast  bearing  the  inscription 
"agioteur"  (stockjobber);  against  whom,  until  recently, 
article  422  of  the  Code  penal  was  directed,  and  against 
whom  there  still  exists  to-day  the  "  faculte  d'escompte" 
(right  of  purchaser  to  demand  his  stock  at  any  time  by  ten- 
dering the  money) .  This  is  a  striking  instance  of  aberra- 
tion in  the  authors  of  the  law  of  1898,  which  again  demon- 
strates that  when  the  lawmaker  starts  from  false  premises, 
he  is  bound  to  be  unceasingly  tossed  about  and  to  fall  into 
all  sorts  of  follies,  intended  in  his  mind  to  justify  him,  but 
which  succeed  only  in  causing  his  errors  and  nonsense  to 
blaze  out  with  greater  force. 

If  we  examine  the  usefulness  of  the  joint  liability  for 
continuations  (reports),  we  reach  conclusions  just  as  much 
disappointing  from  an  economic  standpoint. 

Peter  is  buyer  for  the  1 5th  instant  of  securities  worth 
100,000  francs.  Paul  is  seller  of  these  same  securities. 
Then  comes  the  fifteenth.  Paul  brings  his  securities,  but 
Peter  has  not  the  funds;  this  does  not  concern  Paul;  he 
has  sold;  he  delivers.  At  that  moment  enters  the  "con- 
tangoer"  (reporteur) — Jack,  we  will  say — with  100,000 
francs.  He  takes  up  the  securities  and  resells  them  to 
Peter  for  the  next  settlement.  All  this  takes  place  at  the 
stockbrokers',  and  Peter,  Paul,  and  Jack  do  not  meet. 
Now,  Jack's  transaction  is  very  simple.  He  takes  up 
securities  which  he  resells  at  once  at  a  slight  profit.  He 
makes  a  temporary  investment  and,  as  a  result,  keeps  the 
securities  as  long  as  he  is  not  repaid.  He  is  well  insured 
against  risk. 

267 


National     Monetary     Commission 

Capitalists,  "contangoers,"  "takers-in,"  are,  therefore, 
useful,  but — may  we  be  pardoned  for  our  license  of 
speech — they  are,  of  all  workers,  the  workers  that  work 
the  least.  They  make  temporary  investments  and  remain 
"covered".  Well,  when  we  see  common  commercial 
contracts  resting  on  trust;  when  we  see  thousands  upon 
thousands  of  tons  of  merchandise  delivered,  and  the  seller 
merely  holding  three  months'  acceptances;  when  every 
kind  of  labor  means  risks ;  when  every  bold  capitalist  runs 
all  sorts  of  dangers,  the  law  favors  the  most  timid  and  the 
best  secured  of  capitalists.  This  is  not  only  a  violation 
of  justice,  it  is  also  a  bad  economic  measure. 

Therefore,  from  an  economic  standpoint,  the  stock- 
brokers' joint  liability  is  not  in  itself  a  beneficial  measure. 
It  is  useful  only  to  the  stockbrokers  intrenched  behind 
this  apparent  advantage.  It  intends  to  fortify  a  mo- 
nopoly in  public  opinion,  but,  in  so  doing,  it  helps  to 
preserve  an  institution  resting  on  an  obvious  error  of  the 
lawmaker,  by  a  process  which  is  unnatural,  useless — nay, 
even  dangerous. 

Moreover,  if  it  is  necessary  that  the  stockbrokers  be 
jointly  liable,  is  the  joint  liability  conditioned  on  mo- 
nopoly? Is  it  not  possible  to  conceive  of  a  system  of 
broader  association,  regulated,  as  said  before/in  a  proper 
measure,  and  propped  by  the  establishing  of  special  guar- 
anty funds  through  obligatory  contributions  from  those 
exercising  the  profession? 

Public  safety,  then,  does  not  make  the  monopoly  an 
absolute  requirement. 

(113)  Is  the  monopoly  of  the  stockbrokers  an  advan- 
tage for  the  State?  The  State  faces  a  financial  cor- 

268 


History   and   Methods   of  the   Paris    Bourse 

poration,  whose  power  it  has  itself  created,  and  of  which 
it  can  rid  itself  only  by  indemnifying  it. 

But  the  longer  we  wait,  the  more  will  increase  the 
value  of  negotiable  securities,  and  the  more  must  the 
seats  of  the  agents  de  change  rise  in  value. 

In  1800  there  were  only  six  kinds  of  securities  mentioned 
on  the  official  quotation  list.  There  were  eight  in  1807. 

In  1823  a  royal  ordinance  (of  November  21)  authorized 
the  quoting  of  foreign  securities.  The  monopoly  was  by 
that  much  increased  in  value.  The  great  industrial  move- 
ment resulting  from  railroad  building  found  its  financial 
expression  in  the  creation  of  numerous  certificates  "to 
bearer."  The  value  of  the  monopoly  was  by  that  much 
increased  again.  In  1867,  on  July  24,  the  French  law 
proclaimed  the  freedom  of  the  limited-liability  company 
in  shares.  Shares,  bonds,  and  parts  start  at  once  mul- 
tiplying ad  infinitum.  The  monopoly  is  thereby  once 
more  increased  by  that  much.  In  1885  a  law  on 
transactions  for  future  delivery  is  promulgated,  which 
recognizes  as  legal  the  very  transactions  the  inter- 
diction of  which  seems  to  have  necessitated  the  insti- 
tution of  the  agents  de  change.  In  1893  the  corporation 
law  becomes  still  more  liberal.  Thus,  gradually,  as  the 
economic  movement  manifests  itself,  and  the  lawmaker 
enacts  measures  of  more  liberal  scope,  the  monopoly 
— ipso  facto — is  found  to  expand  the  field  of  its  privilege, 
taking  advantage  of  the  economic  movement  of  an 
entire  country  and  of  the  lawmakers'  liberalism — stand- 
ing by,  a  passive  onlooker  of  that  movement,  and  watch- 
ing the  value  of  its  offices  climbing  up,  as  a  result  of  a 
progress  in  which  it  takes  no  part. 

269 


National    Monetary     Commission 

And  it  was  under  these  conditions  that,  in  1898,  they 
proceeded  to  a  reorganization  which  strengthened  the 
stockbrokers'  monopoly.  No  doubt,  in  1898,  ten  new 
offices  were  created.  But  the  ten  titularies  had  to  indem- 
nify their  new  colleagues,  and  the  total  market  value  of 
all  the  offices  remained  the  same,  keeping  its  tendency  to 
rise,a  as  much  from  the  fact  of  the  expansion  of  the 
securities,  as  from  the  weakening  of  the  Coulisse. 

No  doubt,  in  1898,  brokerage  rates  were  lowered,  but 
they  were  slightly  raised  again  in  1901,  and  a  lively  press 
campaign  was  started  in  latter  times  to  demand  their 
restoration. & 

Let  us  proceed  to  the  last  events. 

(114)  On  July  22,  1901,  the  Compagnie  des  agents  de 
change  of  Paris  entered  into  a  treaty  with  the  curb 
brokers,  according  to  the  terms  of  which  the  latter  may 
obtain  the  stockbrokers'  statements  of  their  own  transac- 
tions (bordereaux  d' agents  de  change)  in  consideration  of  20 
per  cent  of  the  brokerage,  when  these  transactions  bear 
on  Turkish  or  Servian  securities  and  relate  to  operations 
balancing  each  other. 

a  The  first  office  sold  was  valued  at  30,000  francs;  about  1830  they  rose 
to  850,000  francs.  After  the  July  revolution  they  fell  to  250,000  francs 
and  rose  again  to  950,000  francs  before  1848.  They  declined  at  that  time 
to  400,000  francs  and  reached  again  in  1857  2,400,000  francs.  They  de- 
clined to  1,400,000  francs  after  the  war,  and  were  unable  to  rise  for  some 
time  after  the  failure  of  the  Union  Generate.  (V.  Courtois,  Operations  de 
Bourse,  13  6d.,  p.  239.) 

The  value  of  each  of  the  offices  on  the  day  following  the  Reorganiza- 
tion of  the  financial  market  was  placed  at  1,600,000  francs,  representing 
for  the  60  offices  96,000,000  francs.  The  ten  new  titularies  each  paid 
1,372,000  francs  to  their  combined  colleagues,  that  is  to  say,  13,720,000 
francs,  so  that  the  70  offices  were  worth  96,000,000  francs  as  a  grand 
total. 

&Semame  financiere  du  "Temps,"  September  and  October,  1908. 


270 


History   and   Methods   of  the   Paris    Bourse 

In  order  to  fully  understand  that  clause,  let  us  imagine 
a  banker,  Peter,  receiving  the  order  from  a  client,  Jack, 
to  buy  Turkish  rente,  and  another  banker,  Paul,  receiving 
an  order  from  another  client,  Louis,  to  sell. 

Peter  and  Paul,  bankers,  meet  on  the  Bourse  and  deal 
together.  They  visit  together  a  stockbroker,  and  ask 
him  for  a  sale  and  purchase  statement  in  the  name  of 
one  of  the  two.  Together  they  will  take  all  the  necessary 
measures,  in  order  that  each  may  show  his  client  by  means 
of  the  said  statement  that  the  operation  was  legally 
carried  out. 

In  that  respect  it  will  be  rather  interesting  to  cite  an 
important  notice  published  on  the  subject  by  the  "Annales 
de  Droit  Commercial,"  managed  by  M.  Thaller,  professor 
at  the  law  school  of  the  Paris  University  :a 

"  People  living  at  a  somewhat  remote  distance  from 
the  Bourse  have  still  in  mind  the  conditions  under  which 
the  Paris  market  was  reorganized  in  1898.  They  fancy 
that  now  the  parquet  des  agents  de  change  (the  stockbrok- 
ers' parquet)  strictly  enforces  the  privilege  established  for 
listed  securities  by  article  76  of  the  Code  de  commerce;  it 
has  even  been  said  that  the  coulisse  de  la  rente  (the  rente 
coulisse)  has  been  spared.  But  it  now  happens  that  a 
compromise  of  wider  scope,  entered  into  with  the  syn- 
dicate of  bankers  dealing  in  securities  for  future  delivery, 
causes  the  public  no  longer  to  understand  anything  of  the 
system  of  transactions  and  of  the  tutelage  the  law  exer- 
cises over  it. 

"The  safeguard  which  the  personal  mediation  of  the 
stockbroker  was  to  give  to  the  execution  of  bourse  orders, 

a  August,  1901,  p.  225. 
18    '  271 


National    Monetary     Commission 

is  transformed  into  some  kind  of  tithe,  which  he  collects  on 
transactions  concluded  without  him.  The  name  'remisiers' 
is  given  to  those  who  make  contracts  by  themselves,  with 
the*  only  proviso  that  they  shall  daily  have  their  trades 
recorded  on  the  pad  of  an  '  agent,'  who,  in  return  for  a 
percentage  of  the  brokerage,  will  hand  them  an  official 
contract.  And  the  members  of  the  Parquet  have  lent 
themselves  to  this  playing  of  the  part  of  a  machine.  In 
order  that  the  stockbroker  shall  run  no  risk,  it  was  stip- 
ulated that  the  transactions  countersigned  by  him  should 
be  booked  at  once  to  balance  one  another — that  is  to  say, 
the  transactions  reported  on  the  pad  as  purchases  should 
immediately  be  counterbalanced  by  recording  a  sale  to 
the  same  customer,  the  same  curb  broker,  at  the  same 
price. 6 

"So  far  it  has  been  naively  believed:  (i)  That  the 
transactions  by  application  were  subjected  to  regulation 
limits,  such  as  the  verification  of  whether  there  had  been 
more  advantageous  bids  or  offers  (decree,  October  7,  1890, 
art.  43) ;  (2)  that  a  transaction  by  application  that  had 
been  immediately  carried  out  had  no  validity;  (3)  that 
the  stockbroker  held  an  indirect  means  of  restricting 
prices,  because  it  was  in  his  power  to  determine  the  amount 
of  cover  to  be  exacted,  and  that  wherever  his  agency  does 
not  require  him  to  exact  cover,  he  ceases  to  be  in  a  posi- 
tion to  repress  the  market's  outbursts.  It  was  taken 
for  granted  that  all  the  bourse  regulations  were  dependent 
upon  public  order.  But  it  rather  seems  that  they  were 
at  the  mercy  of  a  contract  entered  into  by  two  corpora- 
tions anxious  to  treat  each  other  gently." 

a  See  Le  Marche  Financier  du  "Journal  des  Dtbats,"  February  17. 

272 


History   and   Methods   of  the   Paris    Bourse 

However,  it  is  necessary  to  remark  that  this  agreement 
was  forced  upon  the  stockbrokers.  The  Waldeck- Rousseau 
Ministry  was  then  in  power  and  was  deeply  shocked  at  the 
way  the  financial  market  had  been  reorganized.  The 
economic  principles  of  M.  Caillaux,  the  Minister  of  Finance, 
did  not  seem  to  him  of  a  nature  to  admit  that  a  broad 
market  should  be  based  on  a  monopolized  organization, 
which  is  necessarily  narrow.  In  1898  M.  Waldeck- 
Rousseau  had  become  counsel  for  the  Coulisse  after 
the  death  of  M.  Clauzel  de  Coussergues;  but  the  eminent 
statesman,  the  Advocate- Prime  Minister,  was  too  high- 
minded  and  conscientious  to  let  his  client's  affairs 
interfere  with  his  government  position.  Moreover,  any 
legislative  modification  with  a  view  to  reorganize  the 
financial  market,  in  the  manner  of  the  reorganization 
of  1893,  would  have  been  a  very  serious  proceeding, 
a  meaningless  formula  characteristic  of  his  predecessor, 
who  had  been  his  friend  *  *  *  before  the  "Dreyfus 
Affair,"  and  in  opposition  to  whose  policy  the  new 
ministry  was  called  "the  Ministry  of  Republican 
Defense."  The  members  of  the  Coulisse  were  aware  of 
their  lawyer's  high-mindedness ;  they  had  the  good  sense 
to  understand  it,  and  they  abstained  from  asking  the  least 
favor  of  him;  but  Waldeck-Rousseau,  better  than  anyone 
else,  knew  the  extent  of  the  injustice  done  in  1898.  The 
stockbrokers  knew  it  also,  and  when  M.  Caillaux,  Min- 
ister of  Finance,  exacted  that  they  enter  into  an  arrange- 
ment with  the  curb  brokers,  they  obeyed,  being  thor- 
oughly convinced  that  to  resist  would  be  of  serious  con- 
sequence, and  that  the  monopoly  would  not  be  worth  a  rap 
the  day  a  Minister  made  up  his  mind  to  make  an  end  of  it. 


273 


National    Monetary     Commission 

Moreover,  the  stockbrokers  are  no  theorists ;  not  to  any 
greater  extent  than  the  curb  brokers  are.  One  does  not 
feel  embarrassed  by  considerations  of  public  justice  when 
one  is  benefited  by  a  privilege  in  becoming  party  to  a 
business.  On  the  other  hand,  if  one  enjoys  a  monopoly, 
he  defends  it  to  the  best  of  his  ability.  If  the  Govern- 
ment requires  that  the  monopolist  give  in,  he  must  give 
in  in  order  to  hold  on  to  whatever  he  can  save.  And 
this  is  why  the  stockbrokers,  when  urged  to  enter  into 
an  arrangement  with  the  curb  brokers,  came  to  terms, 
yielding,  however,  as  little  as  possible. 

(115)  In  short,  the  French  financial  market  was  able 
to  fulfill  its  mission  only  by  taking  the  liberties  which 
the  law  refused  to  grant  to  it. 

The  official  market  of  the  stockbrokers,  spurred  on  by 
the  competition  of  the  curb  brokers  since  the  beginning  of 
the  nineteenth  century,  has  been  transacting  dealings  for 
future  delivery.  The  laws  gave  in.  They  allowed  the 
stockbrokers  to  do  that  which  was  forbidden  to  them. 

They  allowed  them  to  have  sleeping  partners  (bailleurs 
de  fonds) . 

They  allowed  them  to  deal  in  foreign  securities.  At 
the  present  time  the  stockbrokers  are  legally  unable  to 
close  a  deal  with  their  clients,  to  have  representatives  in 
a  market  other  than  the  one  with  which  they  are  con- 
nected. These  interdictions  are  the  very  corollary  of 
their  condition.  They  are  ministerial  officers,  appointed 
to  transact  business  in  one  market.  To  expand  their 
means  of  action  can  not  be  thought  of. 

But  are  the  curb  brokers  permitted  to  undertake  what 
is  forbidden  to  the  stockbrokers? 


274 


History   and   Methods   of  the   Paris    Bourse 

On  securities  not  listed  by  the  stockbrokers — yes. 

On  securities  listed  by  the  stockbrokers — no. 

If  the  curb  brokers  were  to  operate  in  officially  listed 
securities,  they  would  encroach  on  the  stockbrokers'  mo- 
nopoly, and  would  be  liable  to  administrative  fines  for 
want  of  being  able  to  enter  the  name  of  a  stockbroker 
on  the  register  prescribed  for  the  payment  of  taxes  on 
bourse  transactions;  also  to  prosecutions  in  police  courts, 
and  to  see,  besides,  their  clients  plead  the  transactions 
null  and  void. 

The  coulisse  for  rentes  (coulisse  de  la  rente)  is  tolerated. 
The  Registry  Department  enters  no  complaint  against 
its  members,  because  the  stockbrokers  provide  the  curb 
brokers  in  rentes  (coulissiers  a  la  rente)  with  special  docu- 
ments, valid  only  as  regards  the  internal  revenue — not 
valid  so  far  as  the  clients  are  concerned.  And  the  clients 
may  plead  against  the  curb  brokers  nullity  of  the  trans- 
actions made  for  their  account. 

Credit  companies  and  bankers  may  purchase  or  sell 
listed  securities  over  the  counter.  But  they  can  not 
apply  purchases  to  sales.  In  such  a  case  this  would  be 
acting  as  intermediaries,  and  would  fall  under  the  ban  of 
the  law  of  28  Ventose,  year  IX,  which  punishes  unwarrant- 
able interference  with  the  functions  of  the  stockbrokers 
(immixtion  dans  les  fonctions  des  agents  de  change) . 

Besides,  there  exists  a  judicial  tendency,  whereby  a  sale 
over  the  counter,  even  if  carried  out  as  a  commercial 
transaction  free  from  any  act  of  mediation,  might  be 
considered  as  a  case  of  unwarrantable  interference  with 
the  functions  of  the  stockbrokers. 


275 


National     Monetary     Commission 

In  this  way  dealings  in  securities  are  subject  to  gro- 
tesque and  incongruous  legal  regulations. 

A  reorganization  of  the  financial  market  appears  neces- 
sary. That  of  1898  was  not  a  reorganization.  Its  prin- 
cipal aim  was  to  prevent  the  passage  of  the  measure 
which  was  then  paramount  in  everybody's  mind,  and 
which  was  to  be  founded  on  freedom,  without  excluding 
regulation. 

The  freedom  of  the  market — that  is  to  say,  free  access 
for  everyone  to  the  exercise  of  the  profession  of  broker  in 
securities,  freedom  modified  by  a  system  of  regulation 
in  the  exercise  of  the  profession — certainly  would  offer  a 
desirable  compromise  between  the  system  of  monopoly 
and  the  system  of  absolute  freedom. 

But  the  French  Government  does  not  seem  inclined  to 
study  the  question  seriously:  first,  because  the  stock- 
brokers would  have  to  be  indemnified;  and  secondly, 
because  the  stockbrokers  themselves  are  desirous  of  hold- 
ing on  to  their  present  monopoly.  As  time  passes,  the 
securities,  continually  on  the  increase,  tend  to  increase 
their  profits.  A  financial  power  has  been  created  whose 
existence,  whose  ever  spreading  influence,  form  the  sub- 
ject of  a  serious  economic  problem,  which  some  day  may 
turn  out  to  be  an  even  more  serious  political  problem. 


Of   THE 

*  & 

OF 


276 


RETURN     CIRCULATION  DEPARTMENT 

TO—  ^     202  Main  Library 

LOAN  PERIOD  1 
HOME  USE 

2 

3 

4 

5 

6 

ALL  BOOKS  MAY  BE  RECALLED  AFTER  7  DAYS 

1  -month  loans  may  be  renewed  by  calling  642-3405 

6-month  loans  may  be  recharged  by  bringing  books  to  Circulation 

Desk 

Renewals  and  recharges  may  be  made  4  days  prior  to  due  date 

DUE  AS  STAMPED  BELOW 


AUG    1  1979 

fl£a  cm,    {\U£ 

J>   | 

C\   f\    •^rtrt'^ 

i 

NOV  22  1993 

DEC  0  I  2003 

UNIVERSITY  OF  CALIFORNIA,  BERKELEY 
FORM  NO.  DD6,  40m,  3/78  BERKELEY,  CA  94720 


212709 


